It’s been a strange and worry start to the year - both in personal and stock market terms. But as lockdown starts to ease and the first children return to school, is now the time to also re-start our investments?
We are always big advocates of investing early in the financial year and using as many of your tax allowances as you can: ISAs, Junior ISAs, Pensions and VCTs – there are plenty on offer.
But this year, there are a few reasons why investing now seems particularly pertinent.
So, if you have the money to invest today and can stomach the ups and downs of markets, why wait? And remember, if a lump sum investment seems too much of a risk, you could opt for regular monthly savings instead.
1. AXA Framlington American Growth
The US stock market has been strong for the past decade, helped by the mighty rise of its technology sector. Year to date, both have remained strong with the Nasdaq index up 13.8%* since January and the S&P 500 up 1.6%*. As we pointed out a couple of weeks ago, Apple and Alphabet are now larger than the whole of the UK stock market. This Core Selection fund has 38%** invested in IT companies, including its largest five holdings.
2. Schroder Asian Alpha Plus
Despite the impact of the pandemic, the International Monetary Fund says emerging and developing Asia will grow by 1% in 2020 and 8.5% in 2021, compared with a contraction of 6.1% this year in advanced economies and growth of 4.5% next year***. This Core Selection fund has been run by the very experienced Matthew Dobbs since launch in November 2007 and, since then, is the number one performing fund in its sector returning 215.1%^ compared with an average 102.7%^ for the IA Asia ex Japan sector.
3. MI Chelverton UK Equity Growth
The UK remains very much unloved by investors and, having fallen the furthest of major indexes in the stock market falls earlier this year, the FTSE 100 is still lagging the rest of the world by some way: Britain’s largest companies are still down some 18.2%* year to date. Smaller companies are even more unpopular. But with so much recovery still to take place, an investment in our home nations could reward over the long term. This Selection fund invests in small and medium-sized businesses in the UK and is another whose manager is the top performer in his sector since launch returning 131.4%^^ compared with 26.5%^^ for the IA UK All Companies peer group.
4. Rathbone Global Opportunities
A global option for those wanting more diversification could be Rathbone Global Opportunities on the Chelsea Core Selection. A consistent performer over the years, it is up 11.2%* year to date while its average peer in the IA Global sector is still down 1.5%*. It currently has 61% allocated to the US and 30% to European equities and has a number of technology companies and payment systems firms in the top ten**.
5. Janus Henderson UK Absolute Return
For those worried that stock markets could fall further, this Selection fund is worth a look. It can make money from both rising and falling share prices, offering some downside protection in down markets. From the highs in February to the March lows, it fell just 4%^^^ and is back in positive territory year to date*. Over the past 10 calendar years it has had just one negative 12 months when it fell 2.7% in 2018^*.
6. Man GLG Strategic Bond
If equities seem a little too risky for you, you could consider a bond fund. Bond markets fell in March too, but to a lesser extent. And the falls led to the asset class becoming good value for the first time in a very long time and offering yields that could compensate for some of the lost income from dividend payments. Some managers even went as far as saying it was the best buying opportunity in a century. This strategic bond fund, which was a new entry into the Chelsea Selection earlier this year, has the flexibility to invest in any type of bond.
7. VT Chelsea Managed Balanced Growth
Finally, for those considering a multi-asset fund, the VT Chelsea Managed Balanced Growth is an option. We often talk about finding a work-life balance and that’s a nice way to think about this fund, too. If you want to aim for higher growth than the cautious portfolio, but you’re not really an aggressive investor, the balanced fund seeks to achieve an equilibrium.
If you’d like to chat over your investments, remember our friendly client service team is available on 020 7384 7300.
*Source: FE Analytics, total returns in sterling, 1 January to 29 May 2020
**Source: fund fact sheet, 30 April 2020
***Source: IMF World Economic Outlook April 2020: The Great Lockdown
^Source: FE Analytics, total returns in sterling, 30 November 2007 to 1 June 2020, IA Asia ex Japan.
^^Source: FE Analytics, total returns in sterling, 20 October 2014 to 1 June 2020
^^^Source: FE Analytics, total returns in sterling, 19 February to 16 March 2020
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and do not constitute financial advice.