Buy low and sell high is an often-quoted investment maxim – and although timing markets is notoriously difficult, this is arguably a good time to be putting money to work.
Last May’s feature on core and satellite portfolios for cautious, balanced and adventurous investors looks to have been successful and good guidance. Despite markets going into freefall amid mounting investor panic about the coronavirus epidemic, all three have ended the year in the black.
Value investing is set for a comeback in 2020, after a decade in the doldrums. While recession risk appears to have subsided, sentiment remains fragile and there is a solid argument for a shift to buying value.
“Value is already pricing in a downturn – and growth stocks trade close to all-time highs,” says Lee Wild, head of equity strategy at interactive investor.
Precisely timing the shift is impossible, though, and Wild concedes growth stocks may have further to climb if macro events such as trade talks and interest rate policies go their way.
An investment made on behalf of a grandchild stands to last a lot longer than the latest must-have gadget or piece of plastic tat, especially for those who take a very long-term view and are prepared to invest for a 40-year timeframe.
The idea of such a long timescale may not be feasible for those grandparents who wish to help with the high costs associated with getting on the first rung of the property ladder. But those who want to help their young grandson or granddaughter in three or four decades’ time will be able to invest at the top end of the risk scale.
It has by no means lost its shine, but our Consistent 30 line-up of funds that produce not just strong but also reliable returns over a three-year timeframe has seen a relatively large exodus this year. While 12 of the 30 funds remain gold or silver star performers – a decent record, given the universe of 2,141 funds analysed – 18 have fallen from grace, two more than last year and one more than the year before that.
Over the past decade, passive investing has soared in popularity. There are two main reasons for this. First, index funds and exchange traded funds (ETFs) have been aggressively cutting their fees. Investors can now pay less than 0.1% to track the fortunes of developed markets such those in the UK and the US.
Investment flexibility is a huge boon, but only when it is used wisely. ‘Go anywhere’ strategic bond fund managers excelled prior to 2018, riding the tail of the 35-year bond bull market, but the return of volatility last year – one of few tests since the 2008 financial crisis – proved challenging for some.
It can be difficult for many private investors to make sense of an established portfolio, while new investors with a lump sum to invest often do not know where to start. One approach is to build a sensible core collection of trusts that focus on mainstream growth, total return or growing dividends that can be reinvested. A selection of satellite trusts can then be added, focusing on more specialist themes.
Brexit uncertainty stifled the UK stockmarket last year, making it one of the poorest-performing markets around the world. The fortunes of individual funds were largely tied to one factor: whether their holdings were domestically orientated or export-focused.
Income-seekers should proceed with caution amid growing headwinds – a mature economic cycle, rising interest rates, the withdrawal of fiscal stimulus and a return to financial market volatility.
“There has been a significant search for yield over the past few years, and as we’re nearer the end of the investment cycle than the beginning, the risks associated with a hunt for income have increased,” says Justin Oliver, deputy chief investment officer at Canaccord Genuity Wealth Management.