Why these funds are consistently popular with investors

When there are thousands of funds to choose from, a way of helping narrow down the options is to size up what other investors are buying.

Although, of course, investors can’t simply rely on a fund’s popularity, and must carry out their own wider research.

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At interactive investor, for several years we’ve kept tabs on the most-bought funds and investment trusts each month. Typically, there are one or two changes each month, and over time new trends emerge and others become less prominent.

However, only a small number of funds are consistently popular, with Fundsmith Equity, managed by Terry Smith, losing its place in our top 10 funds table for the first time in August.

Below, we reveal the funds and investment trusts that investors are consistently buying.  

Funds and trusts in the top 10 since the start of 2023

Following Fundsmith Equity’s exit last month, only two funds have permanently been in the top 10 monthly most-bought table since the start of last year: Vanguard LifeStrategy 100% Equity and Vanguard LifeStrategy 80% Equity.

Both funds aim to mirror the performance of markets by investing in other index funds managed by Vanguard. These funds are seen as potential one-stop shops for beginner investors due to their diversification and low costs, with each fund in the range having a yearly ongoing charges figure of 0.22%.

Over the past couple of years, index funds have dominated the top 10. Last January, Fundsmith Equity was the only fund managed by a professional investor to make the list.

There are a number of factors at play behind this trend. One is that some investors are throwing in the towel on trying to find an active fund that could deliver better returns.

Another reason is that on the back of strong returns for global stock markets over the past decade, some investors are favouring the broad exposure offered by index funds, rather than targeting more focused active funds.

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Now, however, two active funds are in the top 10 and have featured for a long period. Since May 2023, Royal London Short Term Money Market fund has been present each month, while Jupiter India has made consecutive appearances since September 2023. 

In the case of Royal London Short Term Money Market, investors are looking to pocket a distribution yield of around 5% from an area of the bond market that is low risk.

While Jupiter India offers exposure to a fast-growing economy that has favourable demographics, including a young population. India’s stock market has enjoyed a good spell of performance over the past couple of years, and investors buying today will be hoping the purple patch continues. 

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Since the start of last year, four other index funds that usually appear in the top 10, but haven’t consistently made the cut each month are Vanguard LifeStrategy 60% Equity, Vanguard FTSE Developed World ex-UK Equity Index, Vanguard FTSE Global All Cap Index and Vanguard US Equity Index.

Turning to investment trusts, three have consistently remained in the top 10 over the 20-month period: Scottish Mortgage (LSE:SMT), City of London (LSE:CTY) and Greencoat UK Wind (LSE:UKW).

Scottish Mortgage is hugely popular with retail investors. Its approach of trying to identify exceptional growth companies (both listed and unlisted) has paid off over the long term.

But, as Scottish Mortgage’s three-year performance figures show (down -42.4%), it has been a challenging period, with its investment style falling out of favour amid interest rate rises. However, there has been an upturn in performance over one year (up 23%).

This can in part be explained by technology shares performing well and a share buyback plan succeeding in narrowing the gap between the share price and the net asset value (NAV), the value of the trust’s investments.

City of London is popular among income-seeking investors and is conservatively managed, with Job Curtis at the helm since 1991.

Curtis focuses on companies producing plenty of excess cash to pay dividends, and mainly sticks to Britain’s biggest firms that are listed in the FTSE 100 index.

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Over the long term, its returns have been solid, but arguably a bigger attraction is that it is a consistent dividend payer, having raised payouts each year since 1966.

One of our ii analysts reviewed the investment trust last week following the publication of its yearly results. In addition, we recently interviewed Curtis. Highlights from the video interview include an explanation of why he's bullish on the prospects for banks, why he sold Microsoft, and a sector that could be a winner under the new Labour government. 

Greencoat UK Wind is also popular with income investors. The investment trust aims to provide investors with a yearly dividend that increases in line with RPI inflation. This has successfully been achieved each year since the trust launched in 2013 and its dividend yield stands at 7.1%.

In a video interview with interactive investor last summer, its fund manager Stephen Lilley explained why this dividend aim is sustainable in the coming years.

Four other trusts that usually make the top 10, but didn’t achieve a place every month since the start of last year, are global multi-manager strategies F&C Investment Trust (LSE:FCIT) and Alliance Trust (LSE:ATST), global best ideas portfolio JPMorgan Global Growth & Income (LSE:JGGI) and commodity-focused BlackRock World Mining Trust (LSE:BRWM).

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Other trends investors have been focused on over the 20-month period include technology, reflected by Allianz Technology Trust (LSE:ATT) and Polar Capital Technology (LSE:PCT) appearing in the top 10 a number of times, and investment trusts in the renewable energy infrastructure sector that are trading on deep discounts. Both Renewables Infrastructure Group (LSE:TRIG), Gore Street Energy Storage Fund (LSE:GSF), and NextEnergy Solar (LSE:NESF) have all made occasional appearances.

Since interest rates started rising in late 2021, the renewable energy infrastructure sector has been out of favour, in turn putting pressure on share prices. Rate rises have caused a re-pricing of valuations, which has hurt share prices.

As interest rates rise, so do bond yields. As a result, income seekers have more options and can take less risk, as the safest types of bonds, UK and US government bonds, offer yields of about 4% compared to virtually nothing when rates were at rock-bottom levels.