Having decades ahead of them for their investments to grow is the key privilege of 30-year-old investors, but this doesn’t mean that high-octane growth funds or index trackers should be the only priority at this life stage.
Younger investors can generally afford to take on more risk due to a longer time horizon to recover from downturns, but this might vary by individual and personal goals.
Aligning your investments according to your retirement, property or wealth accumulation goal is the first step to take, said Joe Richardson, discretionary investment manager at Dennehy Wealth.
“If you're saving for a house in a year or two, for example, don't invest in a high-risk investment,” he said.
The next steps would be to maximise compounding (when capital gains and interest earned are re-invested to produce themselves a return) and pound-cost averaging (when the impact of buying an asset at the ‘wrong’ moment is reduced by regularly investing a fixed amount), and to understand your tolerance for market volatility.
Richardson’s pick for a 30-year-old with a higher risk tolerance and a long investment horizon was the Jupiter Asian Income fund, which could benefit from Asia’s “host of strong innovative companies with attractive valuations and positive reforms driving change”.
Managed by Jason Pidcock, this £2bn strategy achieved a maximum FE fundinfo Crown Rating of five and was highlighted by both RSMR and Square Mile analysts.
Performance of fund against sector and index over 5yrs
Source: FE Analytics
For those slightly more cautious but still aiming for solid long-term growth, he chose BNY Mellon Multi-Asset Global Balanced, which he said was “a brilliant option” for balanced investors.
“It gives you a diversified portfolio across asset classes and a bit more stability than the ones above while still performing strongly.”
The fund appeared on Trustnet earlier this year for being one of two funds with a perfect 10-year track record, for having ticked just about all the boxes since 2021 and as the best of the best (funds with top long-term performance, a leading manager and the highest Crown Ratings).
Another fund expert who didn’t choose the classic high-growth option was Parmenion’s James Clark, who went for Fidelity Global Dividend.
Performance of fund against sector and index over 5yrs
Source: FE Analytics
“Perhaps a slightly left-field selection, but not losing too much on the downside (if at all) during weaker years is a solid foundation for long-term growth,” he said.
Fidelity Global Dividend is a core holding amongst global equity income funds. Dan Roberts has run it since launch in 2012 and its investment process is centred on investing in companies with strong balance sheets, sustainable dividend growth and a margin of safety in terms of valuation.
“This is a total return-oriented fund with a portfolio of 40-60 holdings, which is well diversified both by geography (not having too much US exposure) and by sector. Active share is high,” Clark noted.
The fund has achieved positive returns in every full calendar year in the past decade, including in both 2018 and 2022 (marginally) when both its MSCI ACWI benchmark and IA Global Equity Income sector average were in negative territory.
Shunning the most common advice to simply buy a tracker, Ellie Sawkins, investment analyst at Wealth Club, pointed out the “raft of opportunities” in private equity that savvy patient investors may wish to be a part of and chose the HgCapital trust*.
Performance of fund against sector and index over 5yrs
Source: FE Analytics
It has net assets of £2.4bn and a portfolio of around 50 high-growth, private companies that you wouldn’t normally be able to access on the stock market.
Its long-term track record is “enviable”, having returned 3,743.3% over the last 25 years, compared to 469.4% from the MSCI World Index.
“The self-styled ‘biggest private equity firm that no one’s ever heard of’ manages more than $70bn on behalf of institutions and is an exceptionally well-resourced manager with a finely honed and repeatable investment process,” Sawkins said.
“It is certainly riskier than a tracker fund, but it hits all the right notes for a young investor: a long-term outlook, high growth potential, and something a little off-piste.”
Finally, Peter Hewitt, who manages the CT Global Managed Portfolio trust, said that if he had to choose just one fund for a 30-something, he would chose a global fund with a bias to secular-growth companies and sectors, pointing to technology in particular.
For a higher-risk option, he selected Scottish Mortgage, to which he recently added himself, or alternatively Monks, another “wonderful name” managed by Baillie Gifford. Compared to Scottish Mortgage, it has a broader portfolio of mainly listed companies.
“Bailey Gifford are good at these type of companies,” Hewitt said. “They haven't performed well recently, but they're coming around – both Scottish Mortgage and Monks have been strong in the past year”.
Performance of fund against sector and index over 1yr
Source: FE Analytics
Despite his enthusiasm for technology, the manager wouldn't have a single-sector or even a single-country vehicle.
“Although we can see only blue sky and wonderful growth, you don't know what's around the corner and something might happen that undermines outcomes,” he said.
Finally, young investors taking a longer view, say 20 years, should have some exposure to India, he added.
“India is a highly valued market – it has been for decades. But, as opposed to China, it is growing. The demographics are very positive, it's a democracy and has the rule of law,” he said.
“For all these reasons, it's much safer than China, so I would be reasonably optimistic for the Indian stock market.”
Source: FE Analytics
*HgCapital Trust is an investor in FE fundinfo.