Aim: Income and growth by investing in the equities of big and medium sized US companies
Minimum investment: Lump sum £1,000, monthly £100
Investment split: 100% in US equities
Isa link: Yes
Charges: Initial 4.25%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 727 770
The JPMorgan US equity income fund aims for income and growth by investing in the equities of big and medium sized US companies.
Bright Financial Services sales director Paul Breaks points out that the fund is targeting a dividend yield of 1 per cent above the S&P index, currently 4.6 per cent. It also has the potential to provide strong long-term capital appreciation through reinvesting dividends.
Considering why this fund could be attractive, Breaks says: “Over the past 10 years, more than twice as many US companies have increased their dividend compared to the UK. During this period, 815 US companies have increased their dividend to shareholders compared to 343 in the UK.”
He observes that the fund seeks out the most attractive big and medium-sized US stocks that deliver a stable income. “Given the breadth of diverse companies in the US, it does make sense to consider exposure to the region particularly from an income opportunity perspective. The emphasis of many US companies has shifted more toward income in recent years, resulting in a broad spread of high yielding equities, across a more diverse range of industry sectors than is available in the UK,” says Breaks.
There could be a real opportunity to invest in the US market according to Breaks, because recent declines have left valuations of US equities looking relatively cheap compared with other markets and on a historical basis.
Turning to the potential down sides to this fund Breaks says: “There is nothing to dislike about this product and it is a welcome addition to the income seekers options.”
He expects competition for the fund to be mnimal given the vastness of the US economy. “The opportunities may well prove enormous once stability, particularly to the US banks, is restored,” he adds.
Summing up, Breaks says: “In the UK, we extol the virtues of investing in dividend paying companies, whether for income or growth, and how long-term returns are boosted significantly when dividends are reinvested. This fund applies the same argument to investing in the massive and diverse US economy. Unless fundamentals have irrevocably changed, it could be very successful over the next three to five years. Let’s not forget the US is still, and will be for many years yet, the worlds biggest economy.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average