April 2010 blog
The start of a new tax year is always a good time to be thinking about investments and retirement planning. To quote Investment week 12th April 2010, “Consistency of performance among fund managers is becoming an increasingly rare and valuable commodity”.
I have recently carried out my own full analysis of investment funds and would like to share some brief thoughts with you. Firstly about average performances.
1) The average fund in each market sector has had a positive return over the last 12 month. Congratulations!
2) The average fund in 18 of the 32 sectors have had a positive return over 1, 3 and 5 years. Congratulations again!
Top Decile is a term that means, in the top quarter of funds in their sector. Sounds impressive doesn't it? Surely you would want to buy one of those wouldn't you? Well no, not necessarily. In reality it may be top decile AND LOST MONEY! Similarly it is possible to have been in the bottom half of some sectors but still made HUGE GAINS!
I have restricted my 'elite + ' funds to ONLY those achieving good, positive returns on a regular and consistent basis over 1, 3 and 5 years. I have then applied additional criteria because many funds qualified as top quartile over 3 years but had a very low return, so have been excluded. This leaves 23 funds in 11 IMA sectors,.
There are another 8 funds from 6 market sectors which do not have a 5 year track record. These have however been chosen for the 'elite' funds based on their 3 year and 1 year performances. In addition 2 funds have been selected that do not have a 3 year track record but whose 1 year performance has stood out, with one achieving 76.35% growth.
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The 'elite' funds list also contains another 15 funds over 11 market sectors which qualify on the basis that they have achieved consistent high returns, albeit missing a top quartile ranking in one of these three time periods. A further 2 funds from the Japanese sector have also been added. These particular funds have way outperformed their market sectors and recorded strong growth over the last 3 years.
2 of the 50 funds are Green, Ethical or Socially Responsible Investment funds which goes to prove that you can be ethical and still make a consistent, market leading return. 'Socially Responsible' Investments are dear to my heart and are also growing in popularity as more and more people become environmentally aware and morally conscious.
Finally, I have incorporated a 10% wild cards list of 'elite' funds which technically do not meet the strict criteria that the other 50 have been judged by. No funds qualify in the Gilts sector and some investors do like to have some exposure to Gilts, so I have included what I consider to be the top Gilt fund in my 'Wild card' selection. I have also selected three of the best performance Socially Responsible Investment funds, with returns that would satisfy most investors. My final fund selection is one that focuses on Industries of the Future and selects in an Ethical manner. Therefore this means that my 'Elite' funds selection amount to 55 and 6 of those fall into the Green, Ethical, Climate change, environmental or Socially Responsible Investment category.