Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

During another volatile year for shares and bonds, it paid to be diversified beyond British shores. Among stock markets, the US, Japan and Europe all delivered attractive returns, easily surpassing gains in the UK1

It was also an ideal year for regular savings plans. After an uncertain start and sharp falls on markets during the autumn, shares came racing back in November and December. Investing a set amount each month automatically takes advantage of volatile markets, because it results in more fund units or shares being bought after falls and fewer once markets have risen.  

There is little reason to believe markets will turn more predictable this year. While the outlook for interest rates and inflation has improved over the past couple of months, the question remains have markets gotten ahead of themselves? Markets are now more optimistic about the outlook for rates than central banks, leaving room for disappointment.   

Over the next few months, whether or not corporate earnings can bounce back after plateauing in 2023 will also be a key factor. If they can – and the world continues to avoid a deep slowdown or recession – more clouds will clear from the horizon. However, without an earnings recovery, markets risk appearing overvalued around current levels.  

Professional analysts currently expect company earnings in the world’s largest market of the US to grow by about 12% this year, which would be a good result if they did2.    

No doubt these and other factors influenced the buying choices of investors at Fidelity Personal Investing over the year. A truly diverse bunch – money market funds, index trackers and a technology fund – were all among the best sellers.  

With returns on cash and near-cash securities heading above the 5% mark, money market funds proved the big winner of 2023. They offered investors a rare combination of safety and income, made all the more attractive after inflation finally pulled back below this level in October.    

The £1.3 billion Fidelity Cash Fund took the top spot for SIPP purchases. This fund aims to generate a return that matches or exceeds the Sterling Overnight Index Average, or “SONIA”. The SONIA rate is 5.2% at the time of writing³. The Fidelity Cash Fund is one of Tom Stevenson’s four fund picks for 2024. 

Two more money market funds – the Royal London Short Term Money Market Fund and Legal & General Cash Trust – were in third and fourth place respectively for the year.

The Fidelity Index World Fund – in second place – was the top choice for investors seeking a stock markets exposure. This fund tracks the MSCI World Index converted back into sterling. It has an ongoing charge of just 0.12%, so offers an attractive way of diversifying an investment portfolio composed mainly of UK shares.

In fifth place, the Fidelity Global Technology Fund was the most popular actively managed fund of the year. This fund encapsulates the other big theme of 2023 – the startling revival of America’s mega-cap tech companies in an environment of relenting inflation and fervent speculation about an imminent peak in interest rates.  

Being actively managed, this fund can avoid the severe concentration risk suffered by indexed technology funds. This it does, with Microsoft (5.1%); Apple (4.5%); and Taiwan Semiconductor (4.0%) being the fund’s largest holdings at the end of November. 

The Fundsmith Equity Fund continued the active theme in sixth place. After a challenging 2022, it returned to Fidelity’s best seller lists in April. The Fund persisted with its strategy of emphasising consumer staples and healthcare companies, which now account for around 56% of the Fund’s assets. Technology, on the other hand, was down to just 11% of the portfolio by the end of the year⁴.   

Next up were two more tracker funds – the Fidelity Index US Fund and Fidelity Index UK Fund. Between them, these track arguably the two most important stock markets to UK investors – the S&P 500 Index and FTSE ALL-Share Index. Both indices are tracked on a net total return basis – so inclusive of dividends. Low ongoing charges are another key feature here.

The ever popular Vanguard LifeStrategy 80% Equity Fund took ninth position. This is the riskier fund in a series of mixed asset funds, having 80% invested in shares and only 20% in bonds. While this fund invests primarily in index tracking funds from the Vanguard stable, there is an active element in that the manager has discretion over which funds are selected and how much is apportioned to each.

Rounding out the top 10 was another Select 50 choice – the Fidelity Global Dividend Fund. This fund aims for a dividend based total return – from dividends themselves and the dividend growth its holdings can deliver. Capital preservation is the number-one priority.  

This fund offers investors the chance to invest in some of the world’s strongest dividend payers, reducing reliance on the UK stock market where payouts have become increasingly concentrated among a small number of blue chip companies over recent times. 

For more investing ideas, Fidelity’s first Investment Outlook of 2024 is out now.    

Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

Top 10 best-selling SIPP funds on Fidelity Personal Investing in 2023

  1. Fidelity Cash Fund 
  2. Fidelity Index World Fund 
  3. Royal London Short Term Money Market Fund 
  4. Legal & General Cash Trust 
  5. Fidelity Global Technology Fund 
  6. Fundsmith Equity Fund 
  7. Fidelity Index US Fund 
  8. Fidelity Index UK Fund 
  9. Vanguard LifeStrategy 80% Equity Fund 
  10. Fidelity Global Dividend Fund

Source: Fidelity International. Gross SIPP sales from 1 January to 31 December 2023 for Personal Investors only.

Sources

1 Bloomberg, 29.12.23 

2 FactSet, 12.01.24 

3 Bank of England, 12.01.24 

4 Fundsmith, 29.12.23

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Before investing into a fund, please read the relevant key information document which contains important information about the fund. Eligibility to invest in a SIPP and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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