UK investors are flocking to passive funds as only two of Interactive Investor top 10 most-bought investments in August are active funds in a list where Nvidia (NVDA) is the most bought stock.
Fundsmith Equity (0P0000RU81.L) has dropped from the top 10 for the first time since Interactive Investor began tracking its most-bought investments in 2018. Manager Terry Smith faces the headwinds of global stock market returns being heavily influenced by a small number of US technology companies.
Vanguard (VUSA.L) passive funds took the lead, with the asset manager taking five of the top 10 slots. The only active funds that made it into the top 10 in August were the Royal London Short Term Money Market (0P0000NRQO.L) and Jupiter India (0P00018LFD.L).
The L&G Global Technology Index Trust (0P0000XAFS.L) was the most bought investment last month on the platform as “many investors are positioning themselves for technology shares to continue their fine form”, Kyle Caldwell, funds and investment education editor at Interactive Investor, said.
In second place is Vanguard LifeStrategy 80% Equity (0P0000TKZM.L) and Royal London Short Term Money Market came in third.
Looking at the top stocks, August proved to be a turbulent month for equities, with volatility sweeping across markets. Among the companies navigating this choppy environment was Nvidia, which released its latest quarterly update during the month.
Despite the semiconductor giant surpassing analysts’ expectations, the heightened market volatility led to a decline in its share price. Nevertheless, Nvidia continued to be the favoured pick among investors, maintaining its position as the top choice in the US market.
In contrast, Tesla (TSLA), once a stalwart in the rankings, saw its fortunes shift dramatically. The electric vehicle manufacturer reported disappointing Q2 2024 earnings, which triggered a sharp reassessment by investors. As a result, Tesla plummeted out of the top 10 list entirely in August, a significant drop from its third-place standing in July.
Read more: Trending tickers: Nvidia, Rolls-Royce, Tesla and Intel
Meanwhile, Amazon (AMZN) and HSBC (HSBA.L) made their way onto the list, signalling renewed investor interest. Moving in the opposite direction, easyJet (EZJ.L), which had previously been a popular choice, dropped out of the rankings.
Richard Hunter, head of markets at Interactive Investor, said: “August started shakily and ended strongly, providing some buying opportunities as the month progressed either to add to holdings or to buy on the dip, and ii [Interactive Investor] customers took full advantage.
“At the centre of the volatility was the US market darling Nvidia, which not only was at the centre of a technology tempest but also reported its latest quarterly update which, despite beating expectations, resulted in a fall in the share price. However, this was not enough to deter investors – for ii [Interactive Investor] the stock remains top of the most bought .”
In the UK, familiar names dominated the scene. Rolls-Royce (RR.L) continued to be a favourite among investors, adding 7% in August, bringing its total gain for the year to 66%.
Additionally, income-generating stocks remained in strong demand. Legal & General (LGEN.L), which also reported earnings in August, boasts a dividend yield of 9.2% and was accompanied by other high-yielding stocks such as BP (BP.L) (5.3%), Lloyds Banking Group (LLOY.L) (5%), HSBC (7%, rising to 9.4% with special dividends), and Rio Tinto (RIO.L) (7%).
Caldwell looked at Fundsmith Equity and said that although it has outperformed the wider global market since it launched in November 2010, its performance has lagged over the past couple of years.
Read more: FTSE 100 LIVE: European stocks crawl higher ahead of manufacturing data
“Fundsmith Equity manager Terry Smith, like other professional investors, is continuing to face into the headwind of global stock market returns being heavily influenced by a small number of US technology companies,” he said.
“Many investors are positioning themselves for technology shares to continue their fine form. L&G Technology Index retains its place as the most-bought fund. It has large positions, just over 40% of the fund, in Apple (AAPL), Microsoft (MSFT) and Nvidia. Therefore, holding this fund could spell trouble for investors who are overexposed to technology should there be a sharp correction,” he added.
The fund has only grown 6.8% over the last three years compared to an IA Global index growth of 11.5%.
In trusts, Scottish Mortgage (SMT.L) continued in its widespread popularity, but other tech trusts like Polar Capital Technology (PCT.L) and Allianz Technology (ATT.L) continued their long-running strength.
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