Top funds make five times as much money

Wednesday, 15 February 2006 12:00

The top equity funds have generated five times more income than the bottom ones over the last ten years, new figures show.

Emphasising the importance of choosing your investment fund carefully, Fidelity International points out that the difference in the average performance of the top five and bottom five funds in the UK Equity Income sector has been a staggering 192 per cent.

Over the last ten years, the average total return of the top five funds in the sector was 255 per cent, with the average return of the bottom five funds just 63 per cent.

And the picture gets worse over shorter time periods.

Using a five-year horizon, choice of fund can be the difference between making money or losing it.

The top five funds had an average gain of 70 per cent over the last five years, with the bottom five producing an average loss of 1.2 per cent. This is significantly lower than the average return on the FTSE All Share index - which has increased in value by 13 per cent over the same period.

To get around this problem Fidelity recommends using a multi-manager fund - that reduces your exposure to a single manager.

"With 80 funds in the sector to choose from and a variety of different investment styles, picking any one individual fund to invest in can be extremely difficult," noted Chris Ralph, manager of Fidelity's multi-manager equity income portfolio.

"In our new fund, we hope to address this issue, by blending a number of funds with complementary styles to achieve maximum returns with reduced volatility."

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