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Investment funds can come in many different shapes and sizes. This can include exchange-traded funds (ETFs), mutual funds, investment trusts and more. Given that I want to try and beat the market, I’m not really interested in funds that act as a tracker (such as for the FTSE 100). So here are my favourite actively-managed funds that I think could do well in 2023.
Ideas for income
The first area I want to look at is for dividend payments. For this, I like some real-estate investment trusts (REITs). In order to get favourable tax treatment, one of the conditions is that REITs have to pay out a set portion of income as a dividend to investors.
Therefore, I’m putting on my list the Supermarket Income REIT (5.64%), Warehouse REIT (5.81%) and Workspace Group REIT (5.30%). The dividend yields are in brackets.
As can be seen from the names, my focus here is on commercial property, not residential. I feel this area of the property market should be more resilient in 2023, thus hopefully making my future dividend payments more certain.
Aside from REITs, there are other ideas I like that focus on holding multiple stocks that provide income. For example, renewable energy is a long-term theme I think will do well in 2023 and beyond. So I like the Bluefield Solar Income Fund (6.05%) and the Foresight Solar Fund (6.11%). Both focus on investing in solar assets, generating dividends in the process.
With any income fund, I have to be aware of the risk that future dividends aren’t guarenteed. I have to factor this in when thinking about my investment choices.
Investment funds for potential growth
On the other side of the coin is capital growth. Given the relatively poor performance in global stocks this year, I think 2023 could be a better year by comparison. I feel a lot of the bad news going forward has been factored in this year.
I’m confident in my ability to pick large-cap stocks well, so I want trusts where the professionals have expertise in a special area. This includes small-cap/penny stocks, private companies and emerging market (non-UK) stocks.
Therefore, I’ve put on my wish list the Aberforth Smaller Companies Trust, Pantheon International and Templeton Emerging Markets.
I accept these areas of the stock market carry a higher level of risk than me buying FTSE 100 stocks. Particularly when it comes to Pantheon (which invests in private companies), I could underperform massively if it makes poor investments. Unlike a publically traded stock, it can be hard to sell a stake in a private company. But, on the flipside, the potential return is also large.
Building my wish list
I don’t have the cash to buy these funds right now. But throughout Q1 2023, I do plan on trying to buy as many as possible, given my positive viewpoint.
