How to choose the best funds for your pension or isa in a few easy steps. We use funds rather than individual stocks becuase it is a simpler way to get exposure to sectors, factors or countries. It is easier to build a balanced portfolio and funds generally have lower volatility.
The first step on choosing a fund is to know your objective which could be growth, income, capital preservation or diversification. Also consider the timescale over which you are investing.
Once you have a rigorous process investing becomes a lot easier.
With thousands of funds available, you are going to need to use a screener. I like pickafund.com
I look at total returns over 5 years as well as the sharpe ratio which looks at returns relative to price volatility. Consistent returns are key.
Fees are very important as they flow straight through to the bottom line.
Fund size is a useful metric. Very large funds can find themselves unable to buy great companies in a meaningful quantity. Small size funds are often that way for a good reason.
The objectives of the fund need to match the style in which you would like to invest.
A financial coach can act as a sounding board to get the most out of your portfolio at a small fraction of the cost of a wealth manager of financial advisor.
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Chapters
00:00 How to pick the best funds for your pension, consider your objectives
00:52 Using a screener pickafund.com
03:33 Consistent returns
04:29 Fees
05:11 Fund manager
05:25 Objectives of the fund
06:07 Size of the fund
07:14 Profile of the fund
07:43 Top 10 holdings
