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Vanguard LifeStrategy and other funds that spread risk easily

Safer bet: In addition to established FTSE companies, LifeStrategy funds also invest in government bonds and gold - assets typically much less affected by economic turmoil


With interest rates stuck at record lows, most savers can’t get their hands on the rewards they think they deserve.

Most of the High Street banks pay just 0.01 percent interest – that’s 10 cents a year out of every £ 1,000 in an easily accessible account.

But there is another option for prudent savers looking for a more generous return: invest.

Safer bet: In addition to established FTSE companies, LifeStrategy funds also invest in government bonds and gold – assets that are typically much less affected by economic turmoil

For many, the idea of ​​investing is daunting, especially after the most dramatic market moves in years and when fraud is on the rise.

Still, experts say there are lower-risk options available – managed by legit investment companies regulated by the Financial Conduct Authority – that savers often overlook.

Laura Suter, personal finance analyst at AJ Bell, says the specialty funds enable prudent investors to avoid the risks of the stock market while still outperforming their bank.

In addition to established FTSE companies, the funds also invest in government bonds and gold – assets that are typically much less affected by economic turmoil.

Investment company Vanguard offers a number of options for investors who want to play it safe. Known as the LifeStrategy funds, they minimize risk by spreading investors’ money across thousands of high-quality assets.

Some are also aimed at savers who may need access to their money soon, so are designed to make slow and steady returns.

These funds are unlikely to deliver the kind of market profit that many experienced investors want, but can they get the average saver a better return on their money?

An investment of £ 10,000 in the LifeStrategy 20 percent Equity Fund five years ago would now be worth around £ 12,800.

At an average annual return of more than 4 percent (net of management fees), it’s far beyond the reach of easily accessible High Street savings accounts, where the best you can earn is 1 percent with state-backed NS & I’s Direct Saver . Even with a top five-year fix from RCI Bank, the maximum amount you will get is 1.4 percent.

But since the funds have benefited from the strong economic conditions, what happens if the markets take a different turn?

Experts point to a handful of specialized funds that aim to deliver returns even in the most difficult of circumstances – although, as with any investment, nothing is guaranteed.

The Personal Assets Investment Trust, run by Troy Sebastian Lyon, is a popular hedge for more experienced investors, as well as an option for risk-averse savers.

As the fund focuses on safer investments such as government bonds, their value often increases during periods of uncertainty as the price of these assets increases.

This year, the fund has delivered an impressive 13 percent return since March, although the average return is more modest.

Savers who invested £ 10,000 five years ago would now have about £ 12,500 net of expenses. These funds can be purchased through any of the major High Street investment firms offering tax efficient stocks and shares of Isas.

Savers can then manage their money online or on their smartphone. Telephone and in-person brokerage is also available, but may incur higher fees.

Newbies should take the time to research the fees charged by their platform – typically about 0.25 percent per year for your entire portfolio – and those charged by individual fund managers.

Some low-risk funds have been criticized for charging management fees of about 2 percent per year, hurting investors’ profits.

These fees are sometimes performance-dependent, meaning that you only pay them if your investments actually grow.

Tom Stevenson, an investment director at Fidelity International, also warns new investors not to invest all their savings at once or put all their eggs in one basket.

“Diversification is essential to ensure that you spread your risk as all assets are unlikely to crash at the same time,” he says.

Savers concerned with managing their money can automate the process with so-called robo-investors, such as London-based Nutmeg.

The platform has a number of options for prudent or new investors, says savings and investment specialist Kat Mann.

“We ask our new clients questions to find out how comfortable they are with risk and then propose a portfolio that meets their tolerance,” she says.

The platform also allows savers to hold their money in cash and gradually transfer it to their investment portfolio.

Since its launch in early 2017, the low-risk fixed asset portfolio has delivered 2.8 percent year-over-year growth, easily beating even the best cash savings accounts.

However, no investment is risk-free and savers need to think about what options might be better for them and how much money they can afford.

But if you are looking for a better return on your money then an investment portfolio is worth considering.

moneymail@dailymail.co.uk

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Himanshu Singh

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