In a world where novelty is prized, too many money managers try to do too many exciting things. But what if you don’t want to invest in a fund working to boost your returns with bank loans, derivatives, exposure to tiny frontier markets or investments in unlisted, unproven private companies?
What if you just want to invest in a fund run by a manager who buys into mostly solid, well-known UK companies that pay a reasonable dividend and collect 3-4% in income every year? You don’t read about them in the press as much as the more va-va-voom funds, but there are plenty of options.
Try the Artemis Income Fund. It yields well over 4% and (with a couple of exceptions such as Spanish rice and pasta giant Ebro Foods) holds mainly stocks listed in the UK, a market its managers consider to be ‘notably undervalued’. The ongoing charge is a reasonable 0.8%.
When bad turns good
If you’re wondering which sector might do well over the coming decade, it often works to look at what’s done badly over the previous one. So look at the ten years to 2010 and you’ll see investors in US and Japan with a bias towards technology had a horrible time – with the worst funds down 40% plus. Look at today and those are the funds that have soared (600% plus). Simplistic, but interesting.
So what bombed in the last decade? One area is energy, currently massively unpopular. Oil production is very low – at levels that analysts say discounts a total stall in global trade growth. If full recession is on the way that might make sense. If not, odds are the oil price will rise – and energy funds might start to look pretty good. Look at the Blackrock Energy and Resources Income Trust. It’s down a satisfying 20% in the past five years and yields 5%.
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Are you going for gold?
As the Brexit saga has unfolded, gold has done exactly what it is supposed to do – acted as insurance for portfolios containing it. In 2016 you got around $1.45 for £1. Today you get around $1.25. However, the price of gold has soared: in October it hit an all-time high (£1,286 oz). The gold price has risen in all currencies in reaction to worries about the trade war between China and the US, and about the possibility of a new round of money printing. But it’s still a nice reminder of why it makes sense to hold 5-10% of your portfolio in gold.
When nasty stuff happens, the gold price pretty much always rises. The simplest way is via a listed exchange traded fund such as the London listed ETFS Physical Gold. If you want to add a little more risk into the mix, the Blackrock Gold and General Fund holds most of the big global gold and precious metal miners.
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Merryn Somerset Webb is editor-in-chief of Money Week. Her views are personal: always seek professional advice