Looking at the top funds, stocks and trusts where investors have been stashing their money reveals some interesting investment trends and can prompt ideas if you are thinking about how to put your own cash to work.
This month, a couple of familiar trends continue while other former-favourites drop out of the most-bought list. As usual, Big Tech is one of the main forces driving the day.
Despite a dramatic sell-off in the tech sector earlier this summer, Nvidia was the best selling stock on retail investment platform Interactive Investor in August. Meanwhile, the L&G Global Technology Index topped the league table as the platform’s most-bought fund.
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When it comes to the Magnificent Seven tech stocks, though, investors could be starting to realise that not all opportunities are made equal. Amazon made an appearance in the “top 10” table, despite its share price taking investors on a rollercoaster ride this summer, but Tesla dropped out of the list after delivering disappointing quarterly results in July.
Another former-favourite that has disappeared from the league table this month is Fundsmith Equity, a portfolio managed by fund veteran Terry Smith. The fund has delivered strong performance in the past but has struggled to beat the benchmark over the past three years, as it is less exposed to tech than the broader market. The fund also doesn’t hold Nvidia.
“We’ve been tracking the most-bought funds and investment trusts among our customers since the start of 2018, and this is the first time Fundsmith Equity has not made the top 10,” says Kyle Caldwell, funds and investment education editor at Interactive Investor.
That said, market sentiment could be starting to turn when it comes to Big Tech, with investors reacting bearishly to Nvidia’s latest results at the end of August. If the sector’s fortunes change, fund managers with underweight positions could finally be vindicated – although it would take quite some reversal to undo the stratospheric growth of the past few years.
Top funds ranked
Other than Fundsmith Equity dropping out of the top 10, the list of the best selling funds is largely unchanged from last month. Tech funds, global funds and ETFs remain popular. The only new fund to enter the list this month compared to last is the Vanguard US Equity Index.
US equities plummeted between mid-July and early August thanks to volatility in the tech sector and a broader sell-off in markets, prompted by fears of a US recession. However, they have now recovered almost all of this ground and the S&P Total Market Index, which the Vanguard fund tracks, has risen almost 18% year-to-date.
When it comes to ETFs, a key reason for their popularity is the low fees that tend to come with these products compared to active funds. What’s more, active funds have been failing to beat passives amid the technology boom as, like Terry Smith and Fundsmith Equity, most tend to hold underweight positions compared to the broader market.
“One reason is because portfolio concentration rules prohibit funds from holding more than 10% in a single stock,” says Caldwell. “Such rules are in place to ensure funds are sufficiently diversified, which helps to reduce risk,” he adds. Meanwhile, most index funds can hold up to 20% of their assets in a single stock.
Top 10 most-purchased funds
| Rank | Top funds |
|---|---|
| 1 | L&G Global Technology Index |
| 2 | Vanguard LifeStrategy 80% Equity |
| 3 | Royal London Short Term Money Market |
| 4 | HSBC FTSE All-World Index |
| 5 | Jupiter India |
| 6 | Vanguard LifeStrategy 100% Equity |
| 7 | Vanguard FTSE Global All Cap Index |
| 8 | Fidelity Index World |
| 9 | Vanguard LifeStrategy 60% Index |
| 10 | Vanguard US Equity Index |
Top investment trusts ranked
Tech has also proved popular on the investment trust front, with Polar Capital Technology and Allianz Technology both making an appearance. But it is Scottish Mortgage that tops the league table again this month.
The trust has taken investors on a rollercoaster ride in recent years. As MoneyWeek’s Max King points out, its share price trebled in the two years to late 2021 but then plunged by almost 60% in the year and a half that followed. The portfolio has recovered some ground since but it hasn’t all been smooth sailing.
According to the latest factsheet, the trust's share price performance has beaten the benchmark over the past year to 31 July, but it has underperformed when looking at the net asset value (NAV). The share price is up 18.1% while the NAV is up 8%. The index has delivered 17.7% over the same period.
One reason trusts are popular with investors is that they often trade at a discount, with the share price coming in lower than the value of the assets held in the portfolio. This gives investors the opportunity to bag a bargain, if they think the share price will ultimately catch up.
The latest data suggests Scottish Mortgage is trading at a 9% discount, which could go some way to explaining its popularity.
Top 10 most-purchased trusts
| Rank | Top trusts |
|---|---|
| 1 | Scottish Mortgage |
| 2 | Greencoat UK Wind |
| 3 | JP Morgan Global Growth & Income |
| 4 | City of London |
| 5 | Alliance Trust |
| 6 | Polar Capital Technology |
| 7 | Pershing Square Holdings |
| 8 | Allianz Technology |
| 9 | BlackRock World Mining |
| 10 | F&C Investment Trust |
Top stocks ranked
Nvidia retained its position as the most-bought stock of the month, despite a sell-off in the wider market in July and early August. It is possible that some investors saw this as an opportunity to increase their holding in the stock at a slightly lower price.
Commenting on broader conditions over the course of the month, Richard Hunter, head of markets at Interactive Investor, said: “August started shakily and ended strongly, providing some buying opportunities as the month progressed either to add to holdings or to buy on the dip, and [Interactive Investor] customers took full advantage.”
Outside of the tech sector, some of the usual homegrown suspects made an appearance in the league table, including Legal & General, Rolls Royce and a couple of UK banking stocks. Two mining stocks also feature – Glencore and Rio Tinto – alongside oil and gas company BP.
UK equities have been out of favour since the Brexit referendum, but remain popular with some income-hungry investors thanks to the high dividends on offer. Interactive Investor points out that Legal and General currently has a dividend yield of 9.2%, while HSBC has a yield of 9.4% when special dividends are taken into consideration.
Top 10 most-purchased stocks
| Rank | Top stocks |
|---|---|
| 1 | Nvidia |
| 2 | Legal & General |
| 3 | BP |
| 4 | Rolls Royce |
| 5 | Helium One Global |
| 6 | Glencore |
| 7 | Amazon |
| 8 | Lloyds Banking |
| 9 | HSBC Holdings |
| 10 | Rio Tinto |
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