How to use the Wealth Shortlist

Being a kid in a candy store isn’t always as fun as it sounds. While having lots of choice can be a good thing, when it comes to investing it can often be more of a hindrance than help.

Investment funds can be a good choice for potential long-term growth or income. But there are thousands of funds available for UK investors, and knowing where to start can be a hurdle.

That’s why we launched the Wealth 150 in 2003 – to narrow the field and help investors choose from a shorter list of what our Research team thinks are great funds with long-term performance potential. Over the years our list has evolved, responding to client need and changes in the investment industry, as well as our greater collective expertise, to become the Wealth Shortlist today.

In this article we explore how investors can go about using the Wealth Shortlist, which includes a variety of funds with different aims and areas of focus.

This article isn’t personal advice. If you’re not sure if an investment is right for you, ask for financial advice.

Funds selected by our analysts

The Wealth Shortlist is designed to help investors build well-balanced and diversified portfolios. Our Research team puts funds under the microscope to make sure the list only contains the funds that our in-depth analysis indicates have the greatest performance potential.

To use the Shortlist to build a portfolio, you should be comfortable deciding if a fund fits your investment goals and attitude to risk and know how to choose and maintain a diverse mix of funds to help reduce risk.

The Wealth Shortlist includes funds across a range of sectors, and risk levels that won’t be right for everyone – it isn’t personal advice. You’ll need to think about your own goals, attitude to risk and wider portfolio before making any investment decisions. Funds can fall as well as rise in value and you could get back less than you invest.

Find out more on how funds make the list

How to filter funds

To start investors off on their journey, the Wealth Shortlist can be filtered by three main categories: fund sector, fund objective and fund type.

Fund sectors cover a broad range of geographical areas and investments, including bonds and company shares (equities). Broadly speaking we think investors should maintain well-diversified portfolios spread across lots of different investments, sectors, regions and investment styles. But which ones you choose depend on your individual circumstances.

Equity funds could be a better option for those looking to grow their wealth over the long term (at least 5-10 years), but are prepared to see the value of their investment fluctuate over time. Some are called ‘equity income’ funds – these invest in dividend-paying companies and aim to pay investors an income, either monthly or every three or six months. These can grow in value over time too. It is important to remember though that income is not guaranteed.

There are several sectors focused on company shares. These include the Global sector, where funds can invest in businesses from across the globe. Others focus on a specific country or region like the UK, North America, Europe or Japan. Some focus on higher-risk areas that offer long-term growth potential but with added volatility, such as emerging markets, Asia, and smaller companies.

Other funds focus on bonds. Bonds are loans issued by companies, and usually pay a fixed rate of interest (or income) to the lender. They're often viewed as ‘lower risk’ than investing in a company’s shares. This means they can help limit some of the ups and downs that normally come with investing only in shares. They can still lose money though and income from bond funds is variable and not guaranteed.

Read our latest sector reviews

There are different types of bond fund, including corporate bond funds that focus on higher-quality bonds. These may offer lower yields than higher-risk, higher yield bonds. Strategic bond funds are more flexible. They have the freedom to invest across the bond markets, including government, corporate and high-yield bonds.

Some funds – including Multi-Asset and Total Return funds – invest in both shares and bonds, as well as other assets, like commodities and currencies. Each one is different with its own aims – some focus more on growth, others on income, while some aim to shelter wealth when markets fall. So, it’s worth looking at the objective of each fund and where it invests before considering investing.

To help with this, you can also filter the funds by objective – either income, growth, or income and growth.

Finally, you can filter by fund type – active or passive. Actively managed funds aim to perform better than their benchmark over the long term. Tracker, or passive, funds aim to perform in the same way as their benchmark (the market they track). Some investors prefer one type over the other, though for some a blend of the two might be preferable.

How to use active and passive funds

Looking under the bonnet

Once you know your investment objectives and what type of fund you want to invest in, there are several to choose from in each sector.

For each Wealth Shortlist fund, you can select to view ‘more info’. Here we provide a summary of why our analysts selected the fund and how it fits in a portfolio. For each fund you can see whether it aims to deliver income, growth, or both. We also dive into other important areas like management style, top holdings, cost, risk, and performance.

You can also view each fund’s factsheet. From here you can read more of our research as well as the latest fund research update. These updates provide an overview of our analysts’ latest views on each fund, including the manager, process, culture and performance.

Remember that in each sector, you might want to consider fund managers that use different approaches. This can help you achieve a more diverse mix of investments within a single sector. Not all investment styles perform well at any one time, and managers with different strengths, styles and areas of focus will perform differently over time. Remember that past performance is not a guide to the future.

Investments aren’t static, so once you invest, don’t forget to monitor your portfolio and make changes when necessary. There’s no hard-and-fast rule on how often you need to review your portfolio, but we think twice a year is sensible – once a year at the very least.

To help you along the way, our analysts provide ongoing research updates for each fund on the Wealth Shortlist, which includes an update on performance and key changes to the way the fund’s invested. These are emailed to holders of the fund, or you can sign up for fund research here.

Read the HL Research team’s fund updates