Giulia Furlanello started investing for the first time a year ago, and has been encouraged by the 20%-plus return she has seen on her money. The 37-year-old, who lives with her partner in London, says: “I started investing because I wanted to find ways to make my money work for me, and to help me save more money for a rainy day fund."
As well as providing a short-term savings pot for an emergency, Giulia hopes her investments could help her to retire at an earlier age than she might otherwise be able to. Giulia, who works as a senior sales manager, was prompted to open a stocks and shares Isa after talking to a friend who works in the investment industry: “They gave me an overview of what I could do with my money, and what my options were.”
She was particularly attracted to the potential returns from investing, which seemed a lot higher than any standard cash Isa could offer - like most cash-based savings accounts, these have paid a relatively low rate of return in recent years, thanks interest rates being close to an all-time low. Alongside her stocks and shares and cash Isa, Giulia also has an pension that is managed by her employer.
First-Time Investors
Most new investors find there are a bewildering number of choices once they have decided to open an Isa. First and foremost is which platform to use, as a number of providers offer online Isa options, allowing customers to buy and sell funds and trade shares.
Charges can vary significantly, and often depend on the amount of money invested and how often you switch funds or trade shares.
Giulia decided to open her Isa with Interactive Investor as she liked its online offering and the charges seemed competitive and straightforward. Interactive Investor charges a flat fee, rather than a percentage of the funds held on the platform.
Once you have picked the Isa provider, there is the matter of which funds to invest in. Giulia opted to put her money in funds rather than investing directly in shares as this offers far greater diversification. As a new investor, she liked the idea of fund manager using their expertise to manager the portfolio on her behalf.
To help navigate the array of choices, Giulia talked through her options with a friend who works in the industry. She wanted a fund with a good track record, run by an experienced management team. Giulia says eventually picked two funds to start her investment portfolio Fundsmith Equity and T. Rowe Price Global Value Equity fund.
Both are global funds, giving Giulia diversification across different geographic regions and sectors. They also both have coveted gold medal ratings from Morningstar, reflecting analysts’ confidence in the people and investment process that sits behind these funds, which should help them continue to deliver for investors in future.
Global Funds for Diversification
Fundsmith Equity has been one of the top performing — and most popular — funds in recent years, and has a five-star rating from Morningstar, reflecting its strong performance relative to its benchmark and peers. It offers a “highly structured and disciplined investment approach” according to Morningstar analysts which has delivered consistently exceptional returns to investors in recent years.
Over the past three years it has delivered annualised returns of 16.93% to investors. Itss long-term track record is just as impressive delivering annualised returns of 17.77% over five years and 20.38% over 10 years. The fund is run by the highly regarded manager Terry Smith whose investment philosophy is to buy and hold high-quality businesses that he hopes will continue to compound in value.
Morningstar analysts say: “The resultant portfolio is highly focused, which can also lead to sector concentration and valuation risk. Returns may therefore look at odds with its broad MSCI World reference benchmark over the short term and may be out of favour in the periods where the market prefers lower-quality, cyclical stocks. We, however, believe Smith has a good handle on the risks.”
The T. Rowe Price fund has a strong portfolio management team according to Morningstar, whose investment process has underpinned strong returns for this fund. Over three years it has delivered annualised returns of 7.93% for investors and is up 14.64% on the year to date.
Morningstar analysts say the fund’s investment strategy means it tends to hold smaller, more growth-orientated companies in its portfolio when compared to many of its peers. It points out that this can lead to strong returns during periods when the market is racing ahead, but may be less defensive during market downturns.
To date, Giulia has been very pleased with the returns on these funds. She says she appreciates that equity investments can be more volatile than cash savings, but she has not yet had to weather any downturns.
