First steps in the den of equity

Paul Durman asks three advisers what new investors should go for

OK, so you are willing to join the cult of equity. You have accepted the arguments that, in the long run, share-based investments should produce better returns than bank and building society deposits.

The difficult part comes when you sit down to decide where to invest your money. Even if you have confined yourself to unit and investment trusts you still have to choose between hundreds of seemingly similar funds.

A good place to start is by talking to an independent financial adviser, who will help identify funds that match your financial needs and your tolerance of risk. If this is your first equity investment, you may want to start with a "safety first" investment that places a backstop on any potential losses. If you are more adventurous, you may be willing to consider investing overseas, or in smaller companies.

Choose an investment house with a good reputation for investment performance. They say that past performance is no guide to future performance but, frankly, there is not much else to go on. At the moment, the best-regarded investment managers include names such as Perpetual, Schroder, M&G, Fidelity, Morgan Grenfell and Mercury.

Everyone's financial circumstances are different, so it is not possible to make a blanket recommendation of the "best" funds. However, to illustrate some of the issues that investors should think about, we asked three investment advisers to suggest funds for first-time investors.

q Neil Liversidge is senior research adviser with DBS Management, Britain's largest financial advice network with 2,000 member firms. He questions whether now, only eight months away from a general election, is the right time for an inexperienced investor to be thinking about stock-market investment.

Mr Liversidge says investors looking for income should consider corporate- bond PEPs and recommends the "highly rated" Whittingdale corporate-bond PEP. Those who want to invest in shares but still take an income should consider the equity income funds from Perpetual, Credit Suisse and Jupiter.

For investors who want growth and are new to equity investment he suggests the Govett UK Safeguard unit trust, which limits losses if the stock market should fall while allowing investors to enjoy much of any rise in share values. The fund will fall by no more than 9 per cent a year, though it can rise by up to 26 per cent.

q Graham Hooper, investment director of adviser Chase de Vere Investments, suggests first-time investors should make use of a regular savings scheme. This will also limit the damage if share prices suddenly fall. He says Fidelity and Henderson Touche Remnant both offer PEPs that allow this phased entry into the stock market.

He suggests income-seeking investors consider TR City of London, an investment trust that offers a gross income yield of 4.2 per cent and invests in a range of blue-chip UK companies.

According to Mr Hooper the HSBC Income unit trust is a good solid fund. Its investment policy ensures that it avoids most of the more speculative types of company.

For growth investors, he suggests the Mercury British Blue Chip fund: "not a tremendous performer but full of blue-chip shares". He says inexperienced investors are often made nervous by volatile funds. So it can be worth accepting a more pedestrian performance in a solid fund with a stable price.

q Bradford & Bingley is the biggest high-street institution to offer independent financial advice from its branches. Bina Abel, financial planning manager, says it is important for first-time investors to stick to funds with a strong track record. For income investors, she suggests Morgan Grenfell UK Equity Income, Credit Suisse Income or GT Income. For those looking for capital growth, she suggests Fidelity UK Growth, M&G UK Equity Income, Perpetual UK Growth, Schroder UK Enterprise or Schroder UK Equity.

q For a free list of independent financial advisers, call IFA Promotion on 0117 971 1177.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003