2019 was a bumper year for stock markets. The UK’s FTSE 100 rose by 12% over the course of the year, ending not far off its record high, while the S&P 500 in the US jumped an impressive 28%. The same story played out across the globe with the CAC in France, the German Dax, Japanese Nikkei and China’s CSI 300 all recording substantial rises. That’s clearly good news for those already invested but what if you’re looking to invest? Soaring share prices and a lengthy bull market make for expensive stocks and history tells us that a market correction could be imminent so doesn’t that mean it’s a bad time to buy?
And what of bonds? Well, the general consensus is that they are massively underperforming at the moment. To give an example, a UK government bond bought now to mature in 2071 is guaranteeing just 1.21% a year. That’s not too tempting a prospect is it?
Fixed interest bank deposits are, of course, a no no – the interest is so low that you will be losing out to inflation.
So what is a savvy investor to do?
I believe the answer lies in investing into multi asset portfolios, where the fund managers don’t stick to just buying equity market indexes, but pick and choose individual companies based on data. Drawing on extensive research, teams of experts confer to pick and choose companies to make up the portfolio basing their decisions not solely on whether the overall index and equity markets are at all-time highs or not but taking into account a whole range of other factors including dividend payments, potential for growth and the current geopolitical and monetary landscape.
To give an example, the Asset Allocation Committee at Tilney, our award-winning investment management partner, took the decision to increase exposure to UK equities at the end of 2019 in the wake of improved Brexit clarity after Boris Johnson’s resounding election victory while reducing exposure to US equities, deeming the US to be overvalued. In the wake of these decisions the asset allocation within their multi asset portfolios will be adjusted to balance out risk. This balancing act is an ongoing process with regular readjustments in order to deliver results for investors.
Investing in multi asset portfolios removes the issue of market timing from the investment equation and means that clients looking for medium to long term growth can select portfolios and cease worrying about what the markets are doing at any particular time and whether they should be selling specific equities that are performing badly or predicted to crash. It’s a far less stressful approach than cherry picking stocks and constantly wondering whether to hold or sell.
So, is now a bad time to invest? Well, with bank interest rates at rock bottom (still!) and inflation starting to rise, I believe it’s as good a time as ever if you stick to the sound investment principles of diversification through a multi asset portfolio and buy and hold so that you’re not trying to time the markets.
If you’d like to explore the excellent investment options open to you, please do get in touch at email@example.com.
A leading provider of expat financial services and wealth management services across Asia.