Hi everyone. How are you all? As well as many of us pretending to be competent adults (who aren’t secretly wishing that any old person would come and remove their children for 24 hours), I think there are also lots of people pretending to be competent investors. But who are actually secretly wondering what on earth to do. I don’t think even the Chief Investment Doodahs with smart haircuts, good tailoring and Canary Wharf headshots know what’s going on.
It feels as though we are in the final stages of a market melt-up. And when I say final this could be 2 weeks, 2 months or 2 years so don’t spill your coffee and scramble into action.
Some who have held a pretty mainstream collection of the usual global equity fund suspects over the last few years will be looking at 50%+ returns. (Nice problem to have.) But worrying that something is going to give. There are lots of signs that things are uncomfortably exuberant. Tesla. Clean energy stocks. Bitcoin. The Nasdaq. I could go on.
On the basis that I don’t know what is going to happen when, and that we could be idiots now (cashing in too soon) or idiots later (selling too late after a slump), here are the most sensible suggestions I have.
Interactive Investor thinks that Biden’s presidency could be a game changer for green funds:
“Biden has already vowed to make climate change a top priority and reverse many Trump administration policies, such as re-joining the Paris Agreement immediately upon taking office.
“We like Brown Advisory US Sustainable Growth Fund which excludes companies that defy the United Nations Global Compact Principles; derive any of their revenues from controversial weapons; conduct animal testing for non-medical purposes; own fossil fuel reserves; or generate power from fossil fuels”
Over at AJ Bell, they suggest that unloved value funds offer diversification:
“Quality growth and technology have been two themes that have been great drivers of growth for many global funds in the last few years. However, with the market potentially changing, it does potentially leave portfolios open to underperformance if yesterday’s winners turn out not be tomorrow’s winners. As a result, it might make sense to look at value focused funds to bring a little diversification to a portfolio. This is often uncomfortable for investors … a look at the factsheet will often show 4th quartile for plenty of periods. However, that’s the point, and it important to look beyond recent performance and think about what might happen, not what has happened”.
They suggest Schroder Global Recovery as an option. It buys out-of-favour companies that still have strong potential and actively avoids expensive, flavour-of-the-month stocks. As a result, it is massively underweight in technology, healthcare and industrials and significantly overweight in financials, materials and energy.
“At a country level, this means a big underweight to the US and small overweights just about everywhere else. Against global favourites such as Fundsmith or Lindsell Train, it has low correlation, demonstrating the low stock overlap that exists and making them strongly complementary for an investor wanting to diversify their portfolio.”
And Hargreaves Lansdown echo the sentiment:
“Global equity income funds are a good place to start if looking to diversify. Tech firms tend not to pay dividends so fall short of the entry criteria for these portfolios. Artemis Global Income is a good example. Its lack of tech has hurt relative performance in recent years, but is a good hedge against the growth-style trade.”
There you have it. I don’t have the crystal ball. But hopefully there are some useful nuggets in there.
Have a good weekend all. More dragging children out for walks with a fake jolly smile on my face. “Oh I know! Let’s go for a walk!!!????” More bad TV which seems mostly to be about serial killers and con men. How uplifting! I leave you with a final tip. Treat yourself to a big glass of something at 5.30 today. It’s the new 6pm dahlings.