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.
Our Consistent 30 line-up of funds across 15 leading sectors that produce not just strong but consistently reliable returns throughout a three-year period has been running for three years now. And 14 funds have retained their crowns this year, one more than last year. A further 10 funds, though dethroned by stronger contenders, retain their places in the top 10 per cent of their respective sectors, up from just five in 2017.
Investing during the dotcom crash? Drawing an income during the financial crisis? These were pretty hair-raising times for investors, but those who invested regularly in investment trusts in the decade leading up to the financial crisis, then withdrew the natural income in the 10 years since then have virtually quadrupled their money.
The US equity market has been the star performer this year, with the technology-focused Nasdaq index performing particularly strongly, reflecting superior returns from growth stocks compared with value stocks.
In the first seven months of 2018, the Nasdaq 100 rose by 13 per cent and the S&P 500 added 5.3 per cent, compared with 2.4 per cent for the MSCI World index.
European Union regulations designed to protect investors and increase transparency could spell bumper bargains for investors in smaller company trusts, particularly those employing a hands-on approach.
Jennifer Hill examines which tax shelter works best at different life stages and which trusts advisers suggest.
Nerves over Brexit resulted in a UK equity income fund sell off during the first quarter of 2018.