Fidelity World Index fund
This index tracker aims to replicate the performance of the MSCI World Index, which is composed of more than 1,500 large and medium-sized companies from all over the world. With an annual cost of 0.12pc, it is a cheap way to access the global stock market.
JP Morgan Global Research Enhanced Index fund
The disadvantage of index trackers is that they cannot outperform the benchmark they track. For those who want a little more active management, the JP Morgan Global Research Enhanced Index Fund is built in reference to the MSCI World Index but adds in-house research on sectors and companies.
This means it puts more money into the stocks that JP Morgan’s analysts expect to outperform and less into the ones they think are overvalued.
At 0.35pc a year it is “a little more expensive” than the Fidelity World Index fund, said Mr Burgeman. “But the fund has added value over the longer term, outperforming the MSCI World Index by around half a percentage point a year since launch,” he added.
Such a small-seeming extra return can make a big difference if repeated over the decades.
Vanguard LifeStrategy range
The LifeStrategy funds spread your money across a variety of Vanguard trackers, giving you exposure to thousands of stocks and bonds from around the world, and are a common investment for first-timers.
The LifeStrategy 80pc Equity fund, for example, which has 80pc of its money in stocks and the rest in bonds, holds more than £10bn of investors’ money.
The funds have become extremely popular thanks in part to their low cost and simplicity. The annual cost is just 0.22pc, yet, unlike some other funds, the portfolios are “rebalanced” to maintain the stated proportion of stocks and bonds. If you have a long time horizon, opting for 80pc or 100pc exposure to the stock market is probably wise.
The best portfolio for beginners
If investing in one fund seems a little too boring, you may want to build a portfolio yourself.
Dan Boardman-Weston of BRI Wealth Management said the following funds should make suitable building blocks for a first-timer’s portfolio: Liontrust Special Situations, HSBC FTSE All World Index, Gravis UK Listed Property, Polar Capital Global Technology and iShares Emerging Markets Equity Index.
Liontrust Special Situations, run by long-serving manager Anthony Cross and his colleagues Julian Fosh and Victoria Stevens, gives investors exposure to small, medium-sized and large companies in Britain, while Gravis UK Listed Property invests in real estate investment trusts (Reits).
“Property has performed well over the long term and the Gravis fund is ideally placed to deliver good returns over the longer term,” Mr Boardman-Weston said.
However, these funds alone will leave you highly exposed to Britain and you will need some global stocks to balance them. This is why you may want to add funds such as HSBC FTSE All World Index and the iShares Emerging Markets Equity Index. Together these will give you access to some of the largest companies in the world while keeping costs low.
Mr Boardman-Weston also recommended the Polar Capital Global Technology fund thanks to its focus on one of the fastest-growing sectors of the past decade.
This should give you a flavour of how to build your own portfolio. You may decide that you want less exposure to Britain or that another sector interests you more than technology. The key is spreading your risk across different markets so that if one underperforms you have some protection from the fallout.
Tips for investing as a beginner
Before you do anything else, check that you have enough money in an emergency fund. Generally it is advised to keep at least three to six months’ salary in an easy-access account to cover any unexpected costs, for example in case you lose your job.
You should be prepared to tie up the money in your investment portfolio for at least five years, to give yourself the best chance of riding out volatility in the market. If you are saving for a goal in the very near future, it is better to keep the money you’ll need in cash.
Make the most of tax-free “wrappers” such as individual savings accounts (Isas) and self-invested personal pensions (Sipps). Which tax-free vehicle you should choose depends on whether you are saving for retirement or for a shorter-term goal.
Mr Burgeman said: “Investing in a pension can boost the value of the investment with generous tax relief, but may make it inaccessible without large penalties before retirement. Lifetime Isas can also provide a boost, but access can, again, be restrictive.”
A stocks and shares Isa is probably the most appropriate type of account if you want easy access to the money in your portfolio. You can save up to £20,000 a year into Isas and from April you can open more than one of the same type.
Above all, remember to keep a cool head. “Try to take emotions out of investing and set up regular amounts that will be invested for you.
“‘Timing the market’ is notoriously tricky and your emotions can be your own worst enemy when investing,” Mr Boardman-Weston said.
