Although it’s not quite New Year, our financial thoughts will soon be heading towards 2022. There will be self-assessment tax returns to be completed and tax bills to pay.
Many readers will also take the opportunity to review their investments – for example, those held in a tax-friendly Isa or pension – to see whether they remain on track.
With this in mind, The Mail on Sunday asked a mix of investment experts – as well as an avid reader and yours truly – where they would be investing any spare cash in the months ahead as the end of the tax year looms and Isa allowances and pension contribution limits need to be used or lost.
‘India did well, US is pricey… so I’m sticking to home turf’
Jason Hollands, Tilney Investment Management
My rule is to hold no more than 20 funds in my investment portfolio. If I’m thinking about adding a new fund, it forces me to review my existing holdings and decide if one of them needs to be replaced in favour of the new idea.
Otherwise, my approach is to top up existing holdings to keep my asset allocation – the split between different markets – in line with where I think it should be for the long run. The composition of my investment portfolio naturally drifts over time as stock markets don’t all move in tandem.
With my pension fund up against the lifetime allowance limit, my investment focus is now on my Isa. I’m willing to take quite a lot of risk as my investment time horizon is long term, so my portfolio is firmly focused on equity-based investment funds.
My holdings in India did incredibly well this year and have become a bigger part of my overall portfolio, so next year I’ll be focused on topping up my funds in developed markets.
US equity valuations are too expensive. Indeed, I think the US market’s exposure to technology companies, which have powered great investment returns in recent years, might now come under pressure as a result of higher inflation and increasing interest rates.
I will therefore be topping up my UK equity holdings as the UK stock market remains undervalued compared to other developed markets.
It has an abundance of exposure to financials and commodities – sectors that typically benefit from rising rates and higher inflation. I also think the frenzy of overseas bids we’ve seen this year for UK companies will continue, which will create investment opportunities.
I therefore plan to top up my existing holding in investment fund Fidelity Special Situations and add to a more recently established position in Artemis UK Select.
Both focus on companies that the managers believe are undervalued. It’s a style of investing that spent a few years in the wilderness, but has started to work well again over the past year.
Three-way split: Europe, Asia and renewables
Ben Yearsley, Shore Financial Planning
Unusually for me, I haven’t invested any new money in my Isa this tax year. But I have been buying and selling shares within my account, taking advantage of price volatility in some of the holdings.
Aged 45, I’m still a long-term equity investor – and three investment themes are beckoning me to invest; Europe, Asia and renewable energy. Europe has been unloved as an investment area for a long time. Yet company profits are rising, although Omicron might put a spanner in the works.
Three funds I especially like are investment trust European Opportunities (run by star manager Alexander Darwall at Devon Equity Management); Martin Currie European Unconstrained and stock market-listed Montanaro European Smaller Companies.
I’m always positive on Asia as an investment opportunity and I like fund Matthews Asia Innovative Growth. The fund invests in those companies benefiting from the region’s emerging middle classes with money to spend.
Asia’s consumer market is expected to become bigger than those of the United States and Europe combined by 2030.
That’s some statistic, which is why funds such as Matthews Asia Innovative Growth should thrive. Although many renewable assets look expensive, I’m happy to be a decade-long investor. This investment story isn’t going away in a hurry and I will get exposure to it via Schroder Global Energy Transition.
Finally, I will not invest all my Isa money in one go, but drip my money in between now and the end of the tax year on April 5.
Trust in Nick Train and the good old British pub
Edward Browne, retired reader from Manchester
I will continue to invest in investment trust Finsbury Growth & Income, run by longstanding manager Nick Train. The £2billion trust has some quality holdings – the likes of drinks companies Diageo and Remy Cointreau, upmarket fashion business Burberry and UK consumer products giant Unilever.
Hopefully, when the world economy throws off the straitjacket of coronavirus, these consumer- focused businesses will flourish. Train is an outstanding manager and you get the benefit of his expertise via the trust at a bargain 0.6 per cent a year.
I will also continue to add to my holding in pub operator Marston’s.
Although its recent results were disappointing – annual losses for the year to October of £170 million – and it has decided not to pay a dividend for the second year running, I see it as an economic recovery stock. You also can’t rule out an overseas bidder, given the interest shown in it earlier this year from American private equity company Platinum.
Invest in the UK, Japan and the environment
Juliet Schooling Latter, Chelsea Financial Services
Juliet Schooling Latter
Most of my spare money this year has been spent on a new kitchen, so I don’t have much left over to invest. But what I do have, I’ll be investing monthly – primarily because things are so opaque at the moment.
We’ve got a new coronavirus variant, Omicron, causing problems and unsettling the stock market. This is after the market ignored the interest rate rise ten days ago. As a result, it’s really hard to see how things are going to pan out over the next few months.
My pension contributions are invested in funds Liontrust UK Smaller Companies and Marlborough UK Micro Cap Growth.
The UK stock market is cheap – meaning investors are undervaluing it – and long term I think these two funds will do well. I also have a lot of my pension invested in India, a market that has done really well this year.
I’m not ready yet to take profits – I invested in the country about ten years ago and I will leave things alone for the time being.
For my Isa, the Japanese market looks relatively cheap and it’s had a bad year. Baillie Gifford Japanese is the fund I have my eye on. I also like ASI Global Smaller Companies.
I’ve recently invested in Ninety One Global Environment as I really like the long-term investment trend of decarbonisation.
As you can see, I invest for the long term and take quite a bit of risk. But I tend to stick to funds rather than shares as they are more my area of expertise. I did buy some shares in Sainsbury’s and Tesco during the pandemic as I thought they would be winners, but I sold them to help pay for my kitchen.
We’re value hotspot of the world…
Brian Dennehy, FundExpert
The UK remains the value hotspot of the world. Cash-rich global investors will continue to make bids for cheap UK businesses next year.
In this environment I am happy to buy investment fund JOHCM UK Equity Income. It has delivered a return of 21 per cent over the past year and is chock-full of great value stocks – the likes of Aviva, Barclays, Legal & General and Tesco. Dividend increases should see the fund deliver investors an income of around five per cent next year.
Brian Dennehy, FundExpert, with his canny canine Cassie
… but my clever dog is sniffing around Japan
Cassie, Dennehy’s canny canine
My dog Cassie is an unusually clever companion, so every year I like to pick a fund inspired by her. Part border collie, part boxer, for most of the time she longs to roam the Cumbrian hills. But for a bit of fun, I engage her Collie brain for some shepherding of shares.
Japan might appeal, I thought, if I sound her out with a call ‘Japan’ and a toot on the dog whistle. Their smaller companies are cheap, and the Japanese love dogs.
Good choice, judging by her happily wagging tail.
Japanese smaller companies are undervalued and overlooked. Normally, shares in such businesses stand at a 25 per cent discount to their larger listed counterparts, but that discount is now 45 per cent – the largest in more than 20 years. No one is paying attention to this opportunity (apart from Cassie).
Three quarters of smaller companies in Japan are covered by no more than one analyst. By contrast, in the US, 73 per cent of smaller companies are covered by three or more analysts.
I sniff an opportunity. Buy M&G Japan Smaller Companies.
Go global… and spread the risk
I am a big believer in spreading both investment risk and investment opportunity. Such a strategy might not result in knockout investment returns, but it ensures you sleep a little more comfortably at night.
Global investment trusts are my investment cup of tea, especially if they come with a promise to do their very best to generate a growing income through thick and thin. Bankers, run by Alex Crooke at Janus Henderson, is as solid a trust as they come. It has a market value of £1.5 billion, is invested worldwide, has low annual charges of 0.5 per cent, and is on course to deliver its 56th year of dividend increases.
Its performance will not necessarily blow you away – returns over the past year and three years of 13 and 64 per cent respectively – but I’d take those numbers again in 2022 and to the end of 2024. The portfolio has a bit of everything – tech stocks such as Microsoft, beauty products business Estee Lauder and escalator manufacturer Otis Worldwide. But it is as diverse as big portfolios come – with some 168 holdings.
Sound? Yes. Boring? Yes. But as solid as any investment trust can be. My investment cup of tea.
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