Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Top 10 investment funds in 2022

In the list below, are the top ten funds for 2022. We have compiled a list of the best performing funds from the past 5 years and then answered some of the most asked questions regarding investing in funds, so you make an informed decision when choosing your own investments.

Of course, the list we present here to you, is not to be considered investment advice, if you wish to invest in funds, we suggest putting considerable time into investigating each option to see if it’s the right choice for you as an investor.

The list below is compiled of ETF investments that have grown most over the past 5 years. Data source justetf.com.

Top 10 investment funds 2022

  1. iShares S&P 500 Information Technology Sector UCITS ETF
  2. Lyxor Nasdaq-100 UCITS ETF
  3. iShares Global Clean Energy UCITS ETF
  4. Lyxor Russell 1000 Growth UCITS ETF
  5. Invesco Physical Palladium
  6. L&G Cyber Security UCITS ETF
  7. SPDR S&P UCITS ETF
  8. iShares MSCI USA SRI UCITS ETF
  9. UBS ETF (IE) Factor MSCI USA Quality UCITS ETF
  10. Amundi ETF S&P Global Luxury UCITS ETF

1. iShares S&P 500 Information Technology Sector UCITS ETF


Ticker symbol: IITU

Expense ratio: 0.15%

Average return 2.41%

The fund tracks the performance of US information technology stocks based on the Global Industry Classification Standard and is comprised of 82 index components, with top holdings of Apple (APPL) 20.79%, Microsoft Corp (MSFT) 19.92%, Nvida Corp (NVDA) 7% and Visa Inc Class A (V) 3.39%. The Information technology sector fared better than most sectors and looks set to continue its path towards its projected 4.2% growth by the end of 2021. Source comptia.org

2. Lyxor Nasdaq-100 UCITS ETF


Ticker symbol: NASL

Expense ratio: 0.22%

Average return 2.15% 

The fund tracks the NASDAQ-100, consisting of 100 US and international non-financial companies within the technology, communication, consumer cyclical, healthcare, and consumer defensive sectors. Consisting of 102 index components, with top holdings including Microsoft Corp (10.68%), Apple Inc (10.57%) Amazon.com Inc (7.54%) Tesla Inc (6.41%), and Nvidia Corp (4.79%).

Mega cap technology stocks (companies with a cap of over $200 billion) have seen huge growth over the past several years, with technology becoming of ever-increasing necessity in our lives. The increasing dependence on technology in our day-to-day lives may make these ETFs appealing to some investors. 

3. iShares Global Clean Energy UCITS ETF


Ticker symbol:INRG

Expense ratio: 0.65%

Average return 1.9%

The fund utilises both capital growth and income opportunities to provide a return on investment through the fund’s assets which reflect the return of the S&P Global Clean Energy Index. Consisting of 83 individual holdings across the Utilities, Industrials, Information Technology, Energy, Materials and Cash and/or Derivatives sectors.

Top holdings include Vestas Wind Systems 8.68%, Orsted 6.94%, Enphase Energy Inc 5.90%, Nextera Energy Inc 4.53%, Xcel Energy Inc 4.01%

Renewable and clean energy systems continue to become more popular due to the number of developed nations’ recent efforts and aims to reduce overall CO2 production. Global demand for renewable energy increases as the costs to produce and utilise more environmentally friendly energy continue to trend lower.       

4. Lyxor Russell 1000 Growth UCITS ETF


Ticker symbol: RSGL

Expense ratio: 0.19%

Average return 1.82%

The fund tracks the benchmark index Russell 1000 Growth Net, which assesses the large-cap growth sector of U.S equities. Consisting of 500 index components throughout multiple sectors including information technology (44.38%), consumer discretionary (18.4%), communication services (12.74%), health care (9.23%), and industrials (5.96%).

Top holdings for the Lyxor Russell 1000 Growth UCITS EFT include Apple Inc (10.41%), Microsoft Corp (9.96%), Amazon.Com Inc (6.68%), Facebook Inc-Class A (3.81%), and Alphabet Inc-Cl A (3.25%).

An average risk scoring ETF with 5 years above-average return. 

5. L&G Cyber Security UCITS ETF


Ticker symbol: ISPY

Expense ratio: 0.69%

Average return 1.58%

The fund aims to track the performance of the ISE Cyber Security® UCITS Index and aims to take advantage of the growth potential of cyber security products and services.

Consisting of 57 individual index components across the Information technology and industrial sectors, with top holdings of Palo Alto Networks (3.6%), Fortinet (3.5%), Cyberark (3.4%), Avast (3.2%), and Qualys (3.1%).

As the world continues to become more technologically focussed, the cyber security sector continues to reap the rewards of the ever-growing demand for more advanced and secure infrastructure to protect against cyberattacks. This is the only fund on the list that has seen over 10% gains every year between 2017 to 2021.

6. SPDR S&P UCITS ETF


Ticker symbol: SXLY

Expense ratio: 0.15%

Average return 1.48%

The fund aims to achieve a return by tracking large size U.S consumer discretionary companies in the S&P 500 index. Consisting of 509 index components, held across multiple sectors including Information Technology (27.65 %), Health Care (13.25%), Consumer Discretionary (12.35), Financials (11.41%), and Communication Services (11.29).

Top holdings for the SPDR S&P UCITS ETF include Apple INC (6.08%), Microsoft Corp (5.80%), Amazon.com INC (3.92%), Facebook INC-CLASS A (2.22%), and Alphabet INC-CL A (2.20%)

Over the past 5 years, the fund has shown 22.10% returns against its 14.32% benchmark. 

7. Invesco US Consumer Discretionary Sector UCITS ETF


Ticker symbol: XLYP

Expense ratio: 0.14%

Average return 1.46%

The fund aims to achieve a return to its investors through a combination of holding a basket of equities and using unfunded swaps to provide a more consistent performance than would be possible through replication of the Reference Index alone. 

The fund consists of 485 index components in the consumer discretionary sector, with top holdings of Amazon.com ORD (18.12%), Tesla ORD (14.40%), Home Depot ORD 9.38%), Nike CL B ORD (5.89%), and McDonald’s ORD (4.71%).  

8. iShares MSCI USA SRI UCITS ETF


Ticker symbol: SUUS

Expense ratio: 0.20%

Average return 1.45%

The fund aims to track the performance of an index composed of U.S ESG screened companies. Consisting of 138 index components across multiple sectors including Information Technology (17.61%), Consumer Discretionary (17.38%), Health Care (15.91%), Financials (15.41%) and Industrials (10.97%).

Top holdings for iShares MSCI USA SRI UCITS ETF are Tesla INC (5.30%), Nvidia Corp (4.82%), Home Depot INC (4.67%), Microsoft Corp (4.37%), and Walt Disney (4.28%). 

9. UBS ETF (IE) Factor MSCI USA Quality UCITS ETF


Ticker symbol: UQLT 

Expense ratio: 0.35%

Average return 1.44%

The fund aims to provide a return to its investors by investing in large and mid-cap stocks in the MSCI USA index and replicate the price and yield performance of the MSCI USA 100% hedged to GBP. Consisting of 123 index components across sectors including Information Technology (47.1%), 
Health Care (19.9%), Communication Services (11.1%), Industrials (6.8%), and Consumer Staples (5.3%).

10. Amundi ETF S&P Global Luxury UCITS ETF


Ticker symbol: LUXG

Expense ratio: 0.25%

Average return 1.43%

The fund aims to replicate the S&P Global Luxury, net return index, and is comprised of 117 index components across the consumer discretionary (83.39%) and Consumer Staples (16.61%) sectors.

Top holdings for the Amundi ETF S&P Global Luxury UCITS ETF include Tesla INC        (9.36%) LVMH MOET Hennessy (7.66%), Richemont CIE FIN-R (6.57%), Daimler AG-Registered Shares (6.16%), and Estee Lauder (A) (5.69%) Despite the purchasing of luxury goods taking a hit during the global pandemic, there has been an impressive bounce back in the early stages of 2020, with the fund providing 19.80% annual returns against its 11.85% benchmark.  


Please note that past performance is not a reliable indicator of future results.

How to select investment products

When investing in index funds, you first need to complete some due diligence and take into careful consideration the risks and benefits of each fund.

Does the fund match the performance/income/growth that you require? Can you tolerate the levels of risk involved with that fund? Are the companies considered “ethical” if this is important to you? These are the types of questions you should be asking.

If you are uncertain about how to invest in funds that match your goals on your own, a list of the top-performing funds such as the one above may be useful to you. However, the list above is not exhaustive and you may wish to consider other funds too.  

Remember to always research the source of the information, and make sure it came from an accredited financial analyst or someone that you can trust would understand the markets well enough to give an unbiased and impartial view.

When it comes down to choosing a fund, the level of risk you can tolerate is an important factor to consider, as the higher the risk (generally) the higher the rate of expected growth and losses too. With a lower risk fund providing a slower growth rate, but potentially more reliable returns. Which of these options is preferential, is entirely up to you as an investor. 

With each fund you research, there should be an indication of the level of risk associated with it, so it’s important for you to decide in advance what your risk tolerance is, to speed up and clarify your decision making. Many funds are given a level of risk rating by independent firms, which may also wish to incorporate into your decision process. 

To make the process of choosing a fund easier, there are companies that offer investment accounts with a wide range of funds to choose from, such as stocks and shares isas, pension funds, general accounts, and funds for your children.   

Look at the fund’s history

Once you have taken the factors above into consideration, you may want to investigate the fund’s history to see how it has performed over the past several years. After all, a fund can look promising from its projections and even its recent performance but being able to see if it has consistently delivered on projections over several years is another matter entirely. 

A simple way to ascertain whether a fund is living up to its expectations is to look for investor reviews or read Morningstar reports to see how well a fund is performing when compared to the sector it represents, this can provide important information on how a fund is performing. 

As a caveat to this, it is important that we stress that investigating a fund’s recent history should in no way be considered a guarantee of future performance, as they can fall as well as rise just like any other investment.

How to invest in index funds

There are now several options when looking to invest your money into a fund. The three main ways you can invest are: 

  • Investment companies

  • Financial services companies

  • Brokerages

Each option has its own set of benefits and drawbacks, so you should thoroughly investigate which option suits both your investing style and financial circumstances before purchasing.

Once you have chosen how you will go about purchasing your fund, and of course, the fund you will be investing into, the next thing to decide is how often and how much you will be investing.

When and how much you choose to invest is entirely up to yourself and your personal circumstances.

There are two main ways to invest in a fund, monthly investment plans and manual payments.

Monthly investment plans

Monthly investment plans allow an investor to set up a direct debit that is automatically taken from their account and used to purchase more shares. The date and amount can often be chosen, and in most cases can be stopped when needed.

Consistency can be a major factor in building an investment portfolio, as the more consistently you can invest, the more shares you can acquire which can in some circumstances lead to more growth. It’s also more convenient than manually adding money into your account and purchasing shares yourself.

Of course, this is more practical if you know you have a steady monthly income and you can afford to invest each month. 

Manual payments

Setting up a direct debit is rarely a prerequisite of owning an investment fund, so the option to manually add money into an account and purchase shares as and when you would like is often available to you.

This way of investment is often preferable to people with varying monthly incomes that still want to build an investment portfolio.

What types of funds are there?

Whilst there are several types of collective investments available, they will all fall within two categories, registered investment companies, and private funds.

Registered investment companies – US investment funds are registered with SEC (securities and exchange commission) and are required to report financial conditions and policies. When registered with SEC, they will be regulated by the Investment Company Act of 1940. These companies are openly available for retail clients to invest in.

UK investment companies are authorised and regulated by the Financial Conduct Authority (FCA). 

Private funds – In contrast to registered investment companies, private funds are closed off to retail investors and members of the public. Two common types of private funds are hedge funds and private equity funds.

Within registered and private funds, are mutual funds, closed-end funds, and unit investment trusts. 

Mutual funds

These are a collaboration of many individual investors that have their capital pooled together, (and it’s then used to invest in a mixture of assets, such as bonds, individual stocks, and other securities. These funds are managed by fund managers who aim to increase the value of the fund by purchasing assets they feel will either increase in value (capital growth) or will produce income (by way of dividends). They will also choose to sell any assets they feel are underperforming.

For our list of best funds to invest in, we are focussing on ETFs, as they offer the most liquidity and easiest access. 

Closed-end funds

With a closed-ended fund, there is an offering of a limited number of shares that can be purchased as a one-time-only purchase, and usually within a single specific sector of the market. They are often managed actively by an appointed fund manager. Once the initial batch of created shares has been purchased, no further shares can be created within a closed-end fund. 

Unit Investment trusts

Usually offered in the form of an IPO (initial public offering), a unit investment trust purchases securities that it allows investors to purchase as a unit. The factor that differentiates unit investment trusts and mutual funds, is that there is a stated expiration date to the assets held within in. When the expiration of the portfolio has passed, each investor takes their cut of the net profit made from the trust whilst it was active.     

ETFs (exchange-traded funds)

Electronically traded funds are high liquidity securities that track many different types of assets, including commodities and indices. They can contain stocks, bonds, commodities, or a mixture of all of these. ETFs are easily purchased and traded on exchanges. 

The main difference between an ETF and a mutual fund is that they are priced on real-time data, which means they can be sold or purchased throughout the trading day rather than only once the market has closed, as is the case with mutual funds.     

How many funds should you invest in?

The number of funds any one person should own comes down to their own level of experience as an investor. For some investors, owning a single fund can adequately provide the income and growth required, providing it is well diversified to reduce risk. However, for more experienced investors that want to diversify and grow their portfolio, anywhere up to 15 individual funds could be considered “manageable”. 

Do investment funds pay dividends?

Dividends can be paid out from stocks you own in a fund. It is common for the dividend to be paid out by the company to the fund manager, who will then reinvest the dividend amount into the fund you own, buying more shares of the companies held in it, helping it to grow through compounding. This is called an accumulation fund because the dividends accumulate inside the fund and are reflected in its price, this will be displayed in the fund’s name as “Acc”.

Fund managers can also pay out paid dividends to the owners of the fund through cash payments. The dividends paid are paid after fees have been calculated and deducted. This is why it is often advantageous to seek funds with high yields and low expense ratios if dividend income is an investment goal of yours. Funds that payout the dividend are called distribution funds because they distribute dividends to the funds, this will be displayed in the fund’s name as “Dist”.

Not all funds include stocks that pay dividends. The easiest way to determine if the funds you are interested in do, is to check the fund factsheet which will tell you how and when dividend payments (if any) will be paid.  

What are passive investment funds?

What sets a passive fund apart from a traditional fund, is that it tracks a market index. Tracking an index means that an active fund manager is no longer required in the decision-making process, and so passive funds often have smaller fees associated with them. This is one of the main benefits of investing in funds, they allow you to achieve benchmark performance of indexes like the S&P 500 and FTSE 100 at a relatively low cost.

The most common types of passive funds are ETFs (exchange-traded funds) and indices, as these track market indices/indexes. These funds are referred to as “Tracker funds”.

As with any investment type, passive funds have a mixture of benefits and drawbacks to them. The main benefit is the ease at which investments are chosen, the fund tracks the index and very little human interaction is required. This, however, is also a passive fund’s biggest drawback, as there is a possibility that a fund made up of only highly performing stocks can lack diversity.

Should something negative occur within a certain sector and your fund is made up of stocks primarily coming from the affected sector, it could have a devastating effect on the value of your portfolio. 

Investment fund tax

Funds can be subject to taxation in the form of capital gains tax and dividend taxes if your fund holds shares that pay them.

Tax is paid on profits made from the fund or from dividends, however, the amount of tax you pay can be offset by any losses. For example, if you make a £5,000 profit from capital gains, but have £1,000 capital losses, you will only pay tax on that financial year’s net profit of £4,000.

You may still end up owing capital gains tax each year even without selling the fund. Active and passive funds frequently change the stocks that are held within them, and if a stock is sold and realises a profit (which is often distributed to the investors that own the fund), it will be subject to capital gains tax. This is often referred to as a capital gains dividend.  

Can investment funds go bust?

Funds are undoubtedly a simple way to invest your capital when compared to investing in individual stocks, but what kind of risk do they come with?

The good news is the core principle of many funds is diversification. By investing within a heavily diversified fund, you are minimising your risk by purchasing many shares of different stocks through a variety of sectors. For a fund to go truly “bust” would require every stock within that fund to go completely bankrupt, which whilst not entirely impossible, is very unlikely.

When compared to investing in a single stock where it is entirely possible for a catastrophic event to cause major harm to an individual stock’s value, a fund is somewhat protected from this by offsetting one stock’s loss against another’s profit.

For example, if the value of one stock was to decrease by 20% over the course of a year, and two other stocks with the same allocation in your fund were to each increase in value by 10%, both their individual increase in value would offset the harm caused by the 20% value loss of the value losing stock. The value of individual stocks fluctuates throughout the day, so were you to watch the price movements of each stock in your fund, you would see the effect of one stocks’ profit offsetting the losses of others.        

FAQs

What is an alternative investment fund?

Alternative investment funds function in a very similar fashion to a standard fund, it is simply the investments that differ. Whereas a standard fund may focus on purchasing shares, bonds, or cash, alternative investment funds may purchase assets that don’t fall into the more conventional categories, assets such as venture capital, commodities, real estate, and derivatives. 

Are all investment funds listed on exchanges?

Some investment funds are listed on stock exchanges, which are known as “listed funds” or “Exchange-traded funds”. They can be traded in the same way as buying individual stocks, bonds, and derivative products.

How to sell funds

When your fund has matured to the point where you would like to sell it and take the profit gained from its growth, you can do this in much the same way as you will have originally invested in the fund. If you purchased your fund through an online platform, you could simply choose to sell them by using a “sell” button placed next to your holdings, which will atomically alert your platform that you no longer wish to hold the fund and wish to sell. 

Are investment funds a good investment?

There is always a degree of risk associated with any investment opportunity, however, the risk associated with participating in a fund is generally considered lower than purchasing individual stocks, as the funds are often built from multiple stocks and across multiple sectors. This level of diversification is difficult to achieve when investing in individual stocks and is one of the most common and popular risk management strategies.  

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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