Finding the best performing funds to invest in right now
In this article I list the best performing funds over 10 years and 5 years. I also highlight the best investment fund managers in the UK. Yet you shouldn’t just focus on past performance over 5 or 10 years alone.
As one of the most frequently quoted investment experts in the UK national press, including The Times and The Telegraph, I will show you how to pick the best performing funds to invest now. That is very different from simply opting for the best performing funds over the last 5 or 10 years.
In fact I would invest in hardly any of the top performing funds over the last 5 or 10 years and neither should you
Funds are inconsistent and you should invest in funds that suit the current economic and investment environment. I will show you how I successfully identify the best funds to invest in with an increased chance of performing well going forward.
First of all...the funds to avoid
Before I move on to the best funds to invest in it's also important to be aware of the funds to avoid. Unfortunately, there are a number of popular funds that should be avoided as they will hit your returns. You can download a useful list of these funds which the research calls 'dog funds'. So download the guide and use it as a reference point.
Best performing investment funds to invest in
The 10 Top Performing Fund Managers
Fund managers seldom outperform the market in the short term and almost never over the long term. Yet that doesn't mean you should just invest in index trackers or Exchange Traded Funds (ETFs). There is still a place for picking the best active investment fund managers. However, the top performing investment fund managers historically won't outperform the market or their peers all of the time. The table in the next section of this article emphasises the impact on your returns of your misplaced loyalty to even the best fund managers. Just look at Neil Woodford's fall from grace, who until recently was touted as 'an investment guru' by the national press, for a powerful example of misplaced loyalty. The key is to invest in the best funds when the investment environment suits them and to ditch them when it doesn't, in favour of their peers most likely to outperform. You should NEVER invest your money with a fund manager for the long term.
The table below shows the 10 top performing fund managers over the last five years (up to the start of 2020). I analysed the returns of thousands of fund managers versus the level of risk they took with investors' money to arrive at the final table. The best investment fund managers do not gamble with investors' money, instead they invest it strategically to minimise any losses. The Sharpe Ratio is a measure of the level of excess return the fund manager earns for the extra risk he/she has taken. The higher the figure the better. You will notice there is no mention of Neil Woodford.
Manager
Fund name
Sharpe ratio
Nigel Ashfield / Roger Skeldon
Freehold Income Authorised
2.13
David Stevenson / Dr. Paul Jourdan
TB Amati UK Smaller Companies
1.46
Hargreave Hale
MFM Bowland
1.44
Keith Ashworth-Lord
CFP SDL UK Buffettology
1.42
Harry Nimmo
ASI UK Smaller Companies
1.25
Anthony Cross / Julian Fosh
Liontrust UK Smaller Companies / Liontrust Special Situations / Liontrust UK Growth / Liontrust UK Micro Cap
1.18
David Walton
Marlborough European Multi-Cap
1.15
Mark Niznik
Artemis UK Smaller Companies
1.15
Terry Smith
Fundsmith Equity
1.11
Jeremy Gleeson
AXA Framlington Global Technology
1.08
How to pick the best performing funds to invest in now
The key to successful investing is to pick the funds most likely to outperform their peers in the future. That is not the same as picking the funds or fund managers with the best performance over the last 5 or 10 years.
By way of example if you had picked the 10 best performing funds over 10 years
leading up to October 2011 (from the UK All Companies sector) and then invested in them over the next 5 years you'd have been in for a surprise. As the table below shows, over the next 5 years you would have been better off investing in alternative funds within the same sector. Interestingly, Neil Woodford was the manager at Invesco Perpetual High Income and Income funds until 2014 when he left to set up his own asset management company, Woodford Investment Management. However, his flagship Woodford Equity Income fund (which he launched in 2014) underperformed its peers so badly that the fund was closed in 2019 and his entire investment empire closed down, trapping around £3billion of investors' money in underperforming funds.
Fund
Performance rank 2001 to 2011 (out of 112)
Performance rank 2011 to 2016 (out of 212)
Franklin - UK Mid Cap
1
83
Invesco Perpetual - UK Focus
2
27
Franklin - UK Opportunities
3
14
Cavendish - Opportunities
4
62
Artemis - UK Special Situations
5
100
Invesco Perpetual - High Income
6
84
Schroder - Recovery
7
18
Invesco Perpetual - Income
8
95
AXA - Framlington UK Select Opportunities
9
115
MFM - Bowland
10
138
So how can you choose the best funds to invest in right now? The world of fund management brainwashes investors into thinking that you have to buy and hold a fund manager or fund. Yet why should you? The evidence overwhelmingly shows that no fund manager outperforms in every market condition. The fact that a fund manager or fund might top a table of the best performing managers (or funds) over 5 years is just a coincidence of the timeframe used. Use another timeframe (as shown above) and they won't come anywhere near the top. This is true of every fund, even the most popular investment funds. Invesco Perpetual Income, shown above, is a perfect example of a fund that historically was run cautiously and full of defensive shares such as pharmaceutical companies. In an economic downturn these shares and funds do well (after all, people still buy medicines in a recession) yet they underperform when the economy recovers.
So if you can't rely on long term performance tables to pick funds that are more likely to perform well in the future then how can you do it?
The key to investing is to choose the best funds to invest in for the current environment and to use a process that screens out the noise and emotional headlines and focuses on the fundamentals. It's a very simple process that I explain in a short email series How to become a successful DIY investor. In the emails I show you:
The most important investment lesson you will ever learn based on over 100 years of research and experience
The simple and easy to use tool that will help you beat the market
The investment process fund managers want to keep to themselves.
How to know which funds to buy and which to sell, in minutes.
I have used the technique to help investors outperform the market and professional fund managers using only a few minutes a month, using 80-20 Investor. You can read their reviews of 80-20 Investor as well as see the performance in the widget at the foot of this article. I also successfully run £50,000 of my own money live on the site to show how simple it is. 80-20 Investor helps you to simply decide the funds to invest in via your existing fund platform. Find out more about how the service works and take advantage of a 30 day FREE trial.
The top-performing funds over 5 years and 10 years
The tables below show the best performing funds to invest in over 5 years and 10 years. All these funds can be held in a Stocks and Shares ISA or a Self Invested Personal Pension (SIPP). The percentage return shown is the total return figures which assumes all income and dividends are reinvested. The funds are grouped by fund sector so you can see the best performing funds for the most popular fund sectors.
While the funds below would have been the best funds to invest in over the last 10 years and 5 years, within their respective sectors, there is no evidence that they will continue to perform well as I explained earlier. In fact taking such a long term view masks long periods of underperformance. I elaborate on this below in the section titled How to pick the best performing funds to invest in now.
The top-performing funds over 10 years
Asia Pacific Excluding Japan
Fund
10 year fund performance %
Baillie Gifford Pacific
183.30
Ninety One Asia Pacific Franchise
159.10
Schroder Asian Alpha Plus
152.85
SVS BambuBlack Asia ex-Japan All-Cap
130.70
JPM Asia Growth
127.68
Average
86.44
Europe Excluding UK
Fund
10 year fund performance %
Baillie Gifford European
228.69
Jupiter European
207.12
BlackRock European Dynamic
196.80
Allianz Continental European
174.61
BlackRock Continental European
164.69
Average
93.27
Japan
Fund
10 year fund performance %
Legg Mason IF Japan Equity
654.96
Baillie Gifford Japanese
186.25
JPM Japan
172.85
AXA Framlington Japan
144.90
Fidelity Japan Smaller Companies
143.92
Average
99.14
Mixed Investment 0%-35% Shares
Fund
10 year fund performance %
Omnis Investments Ltd Omnis Managed Cautious
78.41
Sarasin Income & Reserves
69.05
Threadneedle Managed Bond Focused
58.36
Fidelity Multi Asset Income
54.55
BM Brooks Macdonald Defensive Income
54.43
Average
39.36
Mixed Investment 20%-60% Shares
Fund
10 year fund performance %
Royal London Sustainable Diversified Trust
139.53
AXA Global Distribution
90.86
Kames Ethical Cautious Managed
79.92
Omnis Investments Ltd Omnis Multi-Manager Balanced
