Mid-tax year review: cash remains most popular asset class
Emma Wall, head of investment analysis, Hargreaves Lansdown: “It has been a good start to the 2023/34 tax year for investors looking for low-risk returns. Cash, which for so many years has been a dead zone asset class, has offered a decent yield thanks to ever rising interest rates. The Bank of England has hiked base rate three times this tax year alone, and on top of 10 previous consecutive rises. And while many are now calling the top of the interest rate cycle, it has meant cash savings accounts, and money market funds are offering an enticing yield to savers and investors.
If you’ve been investing for income over the previous decade equities have been most compelling asset class. But today, lower risk assets such as corporate bonds, government bonds including gilts, and even cash, are giving equity yields a run for their money.
It is apparent that HL clients are aware of this, with money market funds being the most popular sector in the first half of this tax year. The top 10 most bought funds include no less than six money market funds, alongside three global funds, with a growth-style bias and one Indian equity fund. This mix is typical of the top 50 most bought funds – money market funds dominate the most popular list, alongside a peppering of technology funds, quality growth equity funds, and regional equity funds covering the US, Europe and India.
A word of warning to investors planning to continue these trends however – it is only equities that can offer dividend growth and capital growth, so if you’re looking to build a portfolio with a sustainable income and the opportunity to beat inflation over the long term, make sure you have a balanced portfolio which includes a mix of equities, bonds, alternatives and cash.”
|Top funds, 23/24 tax year (net buys, alphabetical)|
|abrdn Sterling Money Market|
|Legal & General Cash|
|Premier Miton UK Money Market|
|Rathbone Global Opportunities|
|Royal London Global Equity Select|
|Royal London Short Term Money Market|
|Vanguard Sterling Short-Term Money Market|