We recently looked at cash versus investing in the stock market over the long term, and where to look for opportunities if interest rates start to fall.
The takeaway? With the interest rate cycle seemingly on the turn, cash is no longer king.
Don’t believe it? The top of the rate environment is difficult to call exactly, but it’s likely we’re not far from it.
Some top paying savings accounts have been pulled or closed, and while the central bankers are chanting higher for longer, the market is predicting cuts in 2024.
In a falling rate environment, you want bond funds in your portfolio – witness the near 30-year bond bull run in recent history.
A good active manager can take advantage of market ups and downs. While yields are high, you’re rewarded with income. When rates fall, you get capital growth – though there are no guarantees.
Falling rates also benefit companies as cheaper debt spurs company spending. Dividends can potentially offer a real yield (higher than inflation), and a boost to total returns.
Remember though, yields are variable and no dividend is ever guaranteed.
3 fund ideas for cash
This article isn’t personal advice. Unlike cash, investments and any income they produce will rise and fall in value, meaning you could get back less than you invest. If you’re not sure an investment is right for you, ask for financial advice. Remember, past performance is not a guide to the future.
Investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a long-term (five years plus) diversified portfolio.
For more details on each fund and its risks, you can use the links to their factsheets and key investor information below.
Ninety One UK Sustainable Equity
Ninety One UK Sustainable Equity is run by Matt Evans, an experienced fund manager who’s passionate about sustainable investing.
The fund aims to provide growth in capital and income over the long term, while investing in companies it believes are making a positive impact on society or the environment.
The fund's positive impact approach makes it different to other funds in the IA UK All Companies sector, and to other responsible UK equity funds.
We think the fund could be a good option for the UK portion of a responsible investment portfolio.
The manager has the flexibility to invest in derivatives and smaller companies which, if used, adds risk.
FIND OUT MORE ABOUT NINETY ONE UK SUSTAINABLE EQUITY, INCLUDING CHARGES
NINETY ONE UK SUSTAINABLE EQUITY KEY INVESTOR INFORMATION
Artemis Corporate Bond
Artemis Corporate Bond Fund Manager Stephen Snowden is a seasoned corporate bond investor and has over 20 years' experience.
We like the manager's clear, disciplined investment process.
The fund aims to generate a combination of income and growth. While it can be more volatile than some other bond funds, we think it’s a good choice as part of a portfolio invested for the long term.
The fund can also invest in derivatives and high-yield bonds which can add risk. Some of the bonds might be more illiquid than others, which could make them more difficult to sell.
FIND OUT MORE ABOUT ARTEMIS CORPORATE BOND INCLUDING CHARGES
ARTEMIS CORPORATE BOND KEY INVESTOR INFORMATION
Invesco Tactical Bond
The Invesco Tactical Bond fund is managed by Stuart Edwards and Julien Eberhardt.
They aim to provide income and capital growth over the long term, by investing flexibly in all types of bonds, with very few constraints placed on them.
Invesco has a strong reputation for fixed-income investing and follows a disciplined investment process, including considering the economic backdrop in their decision making.
The fund isn’t as income-focused as some bond funds though, so it’s best thought of as a way to diversify an income portfolio alongside other holdings.
The managers can invest in high-yield bonds which are higher risk, and have the flexibility to use derivatives which if used also add risk.
FIND OUT MORE ABOUT INVESCO TACTICAL BOND INCLUDING CHARGES
INVESCO TACTICAL BOND KEY INVESTOR INFORMATION
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Our fund research is for investors who understand the risks of investing and that investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.