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.

IT’S always interesting to peek into other people’s baskets. For investors, looking at the year’s best-selling funds acts as something of a proxy for what’s been on investors’ minds these past 12 months.

Top 10 most popular funds on the Fidelity Personal Investing platform over 2021.

Go global…

Markets headed into 2021 off the back of a bumper 2020 which saw stocks soar out of their Covid nadirs. With a few bumps along the way, this year’s market trend has continued broadly upwards. The big question for investors in January was how best to follow it there.

Of course, we didn’t know that at the time. Uncertainty still lingered in the air. As such, keeping your equity allocation global made sense. Doing so meant not having to decide which regions to back, while still having exposure to any broad recoveries. It’s no surprise to see that our top three funds are all global equity funds.

Nevertheless, a broad-based allocation like this does invite another question: why go for an expensive active manager over a cheaper passive, which will sweep up the entire universe?

It’s a question that was clearly on your minds: the Fidelity Index World Fund was your 3rd most popular fund, with the active Fundsmith Equity Fund and Rathbone Global Opportunities Fund ahead of it.

Passive funds will accurately reflect global stock market performance, but there’s still a good argument to be made for going active.

When we recently spoke to Jeremy Podger, manager of the Fidelity Global Special Situations Fund (your 6th most popular this year), he said an active fund gives you that “flexibility to take advantage of opportunities as they arise, and doesn’t necessarily slavishly follow a benchmark that’s dominated by certain regions and certain sectors.”

The ability to pick and choose, to tailor their portfolio around the best opportunities, sets active managers apart from passive funds.

… or American

If in doubt, go American. It’s a mantra that’s worked for many years now, and it’s one that will have left investors smiling again over 2021.

The story behind the US’ success this year is similar to 2020’s. Earnings growth has been very strong across the pond, and that’s helped to support valuations on their rise to ever-higher peaks.

The US market is also well exposed to the sort of tech giants which stole the show in 2020, and continued to bolster their market through much of 2021. It’s no surprise to see that the Baillie Gifford American has 36.5% of its portfolio in tech, nor that the Fidelity Global Technology Fund is 70% weighted to the US.

Naturally, investors will ask themselves whether the US can go again over 2022. Interest rates will rise, and that could play against companies which have their earnings forecast way into the future. Earnings growth will inevitably slow over 2022, and that could leave some US giants exposed at the top.

Still, it remains a bold call to bet against the US.

Time for the UK to shine?

2021 was no different. We thought this might finally be the UK’s year, only to find our gazes again lured wistfully across the pond.

Investors in the Fidelity UK Index Fund can be happy with a near 14% 12-month trailing return, but it’s still only just half what they could have got on Wall Street.

Still, there was good reason to back the UK this year, as investors in the Fidelity Special Situations Fund may have realised. From around November 2020, performance had begun to skew away from the big, techy, growth giants and towards the cyclical underperformers - think energy companies and financials - which dominate our home shores. These sectors have been among 2021’s best performers, and it’s these unloved areas of the market that the Fidelity Special Situations Fund targets.

Cash in hand?

Perhaps the most surprising fund of all to feature in 2021’s top 10 was the Fidelity Cash Fund.

As I wrote back in October, the move to cash towards the end of this year was a sensible one for many investors. Fears were mounting over an impending market crash. Were things to have turned sour, keeping your money in cash could have helped you limit your losses. Moreover, maintaining a cash allocation allows you to pounce when prices are low, and make the most of any subsequent recovery.

There are risks, however, especially as we move into a more inflationary environment. As prices rise your cash stands still. That means any cash you hold is guaranteed to lose money in “real”, inflation-adjusted terms.

Now may be a good time for investors to assess their cash allocation. There’s always good reason to hold some money in cash, but the risks are becoming more acute.

Sustainability comes to the fore

The presence of the Baillie Gifford Positive Change Fund in our top 10 marks how far sustainability has risen up the list of investors’ priorities. The fund backs companies that can drive society forward while still offering strong returns.

The world of ESG and Sustainable Investing is designed to match your investments with your morals. Nevertheless, it can be daunting. If you’re looking for guidance, you can visit our Sustainable Investing hub page, which features interviews with some of the industry’s biggest names, as well as our Sustainable Investment Finder, which helps you pick a fund that’s right for you.

Five-year performance

(%) As at 20 Dec

2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Fidelity UK Index Fund 12.8 -7.6 19.0 -9.1 13.7

Past performance is not a reliable indicator of future returns

Source: HL, total returns as at 20.12.21.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy or sell a fund. Please note that these guidance tools are not a personal recommendation in respect of a particular investment. If you need additional help, please speak to an authorised financial adviser.  You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals. 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. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall.  The Baillie Gifford American Fund, Fundsmith Equity Fund and Baillie Gifford Positive Change Fund invest in a relatively small number of companies and so may carry more risk than funds that are more diversified.  The Baillie Gifford American Fund, Fundsmith Equity, Rathbone Global Opportunities, Fidelity Index World Fund, Fidelity Global Technology and Baillie Gifford Positive Change Fund invest in overseas markets and so the value of investments can be affected by changes in currency exchange rates. The Fidelity index World Fund, Baillie Gifford Positive Change Fund, Fidelity Global Technology Fund and Fidelity Global Special Situations Fund invest in emerging markets which can be more volatile than other more developed markets. The Fidelity Global Special Situations Fund, Fidelity Global Technology Fund and Fidelity Special Situations Fund use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. 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 a Fidelity adviser or an authorised financial adviser of your choice.

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