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- 19th Mar 2015
£5bn of investor’s money at risk this ISA season – make sure you don’t follow the herd
Almost £5bn of investors’ hard-earned savings could find its way into funds which go on to underperform their benchmarks this ISA season, new research from Wealth Horizon has revealed.
The online advice business found billions is being put into the most popular investment funds annually, only for many of them to subsequently lag their respective sectors.
In the first six months of 2014 – covering the all-important ISA season – a total of £7.3bn was invested into the top ten best-selling active funds. But of that total, £4.7bn went into funds which underperformed for the remainder of the year*.
What is more worrying for investors is that this is happening consistently. In 2013, following an ISA season which saw the best-selling active funds take on £8.7bn of new money, a total of £4.6bn went into active funds which trailed their sectors over the next nine months.**
Chris Williams, CEO of Wealth Horizon, said: “Investors baffled by a deluge of marketing material are consistently buying the most popular funds in the UK only to see them underperform.
“The simple fact is, buying an active fund is a total lottery, with one year’s star performer next year’s dunce.”
Rather than invest in a small number of funds every ISA season, Wealth Horizon offers investors the chance to diversify their holdings across a large number of low-cost passive funds.
This approach means investors are not putting all their eggs in one basket and betting on a fund which has been heavily promoted by brokers, only to see it lag competitors after the ISA window closes.
“Investors often hold just a handful of funds in their portfolio which will invariably include some of the biggest and most popular funds but a lot of these will disappoint investors,” Williams said.
“Our fully-automated process offers investors a different way to approach ISA season. Rather than trying to pick winners by random from a list of funds punted by marketers, investors get a fully-tailored risk-adjusted portfolio built for them, all of which can be completed in under 30 minutes.”
To get your free investment proposal from Wealth Horizon please visit www.wealthhorizon.com.
*Based on Trustnet data covering the top ten best-selling active funds in the UK in the first half of 2014, and their returns from 6 April 2014 to 31 December 2014.
**Based on Trustnet data covering the top six best-selling actively managed funds in the UK in the first half of 2013 which have a comparative sector, and their returns from 6 April 2013 to 31 December
About Wealth horizon
Wealth Horizon is the first service in the UK to provide responsible and regulated investment advice online. Without speaking to an adviser, each investor can receive regulated advice and build a tailored portfolio based on their individual risk profile. The advisory service will put an end to the advice gap, making investing more accessible and affordable to all, by allowing customers to access as much or as little investment advice as they require.