The largest gains on the stock market are made by buying when the market is low and selling when it is at its peak. The trouble is that even professional fund managers need a lot of luck to get the timing exactly right.
If you do not have the time, interest or expertise to keep a close eye on the markets waiting for opportunities then drip-feeding into your investments is a great way to level out the big swings in markets that we are seeing at the moment.
This is known as pound-cost averaging. A regular contribution means you buy less stock when prices are high and more stock when prices are low.
“Investing in shares is a long-term business, as the value of investments can go down as well as up,” commented Keith Evins, head of UK marketing at JPM Asset Management, “Investing regularly means people can actually take advantage of these fluctuations, in addition to not tying up all of their money from day one.”
One of the difficulties with this approach is that many funds have a minimum top-up that prevent you investors with less money to put away each month a look in.
However, FE Trustnet has unearthed a handful of top-performing funds that can be topped up with £50 or less.
M&G Global Basics
Headed-up by FE Alpha Manager Graham French, one of the most successful investors of the last decade, there is little doubt of this fund’s pedigree.
Data from FE Analytics shows that it has returned 193.88 per cent over the last 10 years, more than any other fund in its IMA Global sector.
Performance of fund versus sector over 10yrs
Source: FE Analytics
French’s investment process focuses on the world’s most basic industries – those involved in the mining of or manufacturing the materials used for building and industry. He is also increasingly making plays on the rise of the domestic consumer in emerging markets.
The manager talks of a global commodities super-cycle driven by increasing demand from the likes of China and other emerging economies.
Investors can top-up their position in this £5.1bn fund from as little as £10 at a time, making it one of the most accessible funds in the IMA universe.
In fact, much of M&G’s range has the same low minimum top-up. Star manager Richard Woolnough’s M&G Optimal Income and up-and-coming manager Stuart Rhodes' M&G Global Dividend funds come highly rated.
Jupiter European Growth
Europe might seem like the last place you’d want to invest now but the recent hammering to share prices has created an opportune entry point for investors with a long time horizon.
It is likely to be volatile while the debt crisis works itself to a conclusion but that simply strengthens the case for pound cost averaging.
FE Alpha Manager Alexander Darwall has a very long record of outperformance in this market. His European Growth fund has returned 53.69 per cent over the last three years, more than twice the average fund in the sector.
Fellow FE Alpha Manager Cedric de Fonclare runs the similarly run Jupiter European Opportunities fund.
Both have minimum top-up for the fund is just £50.
Neptune Income
In an environment where growth is low and the prospects for the global economy are uncertain, income can provide a much needed boost to your portfolio and help you through the leaner months.
Funds which invest in companies which pay dividends are among the most popular in the UK market place and while there is stiff competition from within the sector from star managers Neil Woodford, Francis Brooke and Bill Mott, FE Alpha Manager Robin Geffen’s Neptune Income fund is one of the few with a £50 minimum top-up.
In terms of performance, our data shows that it has consistently beaten the average fund over one, three, five and ten years.
Investors looking for an out-and-out growth strategy might consider Neptune UK Special Situations, managed by Alex Breese. The fund is top-quartile for performance over one, three and five years.