Where's clever money going in 2010?
Filed under: Investing, Markets, Personal Finance
After a dismal 2008 when seemingly the only people seeing any gains where those shorting the market, in 2009 investors started to make money again.
There was interest in corporate bonds, emerging market funds and commodities and natural resources. But where will the clever money be going for 2010. Daily Finance asked IFAs for their predictions on where the best returns will be made over the next 12 months.
Jason Witcombe chartered financial planner with Evolve Financial Planning believes investors should be proactive in terms of where they invest over 2010.
"We don't believe that any individual can accurately and consistently time markets and there is plenty of academic research to back this up. If I were to take a "punt" on what will happen in 2010 it is that any asset class that has done really well in 2009 (eg gold or emerging markets) will do less well in 2010.
A balancing act
"We recommend that our clients "rebalance" their portfolios on a regular basis, so if you started 2009 with, say, a 5% allocation to gold or emerging markets, you will now have a greater allocation, so now would seem as good a time as any to cash in on some gains and take the portfolio back to the original allocation."Meera Patel, investment analyst at IFA Hargreaves Lansdown takes a similar line to Witcombe.
"With over 2,000 funds choosing the best fund is impossible (as is choosing the best share) but often last year's losers will be the following year's winners.
"Fund managers who were defensive have had a very hard year and this has been a global phenomenon not just a UK one. But we believe that yield and quality will make a comeback during 2010 so fund managers focusing on this should do far better.
"In the UK the best person who personifies this is Neil Woodford of Invesco Perpetual Income and High Income but we would be surprised if this was the best fund of all. A more specialist one such as Jupiter China is my bet for the best fund."
Providing world economic growth does not collapse Patel remains bullish about emerging markets.
"It is of course true that emerging markets have had an excellent run during 2009 and we don't expect such superlative performance next year but, providing China carries on with its own form of quantitative easing, we think China and emerging markets should perform well.
"Its growth is broad based across retail, export and infrastructure. While inflation may increase in the short term in China, I don't think it will be a problem longer term.
Inflation-proofing
Neil Mumford, chartered financial planner with Milestone Wealth Management argues that whilst equities have rallied fantastically over the last year, returns for 2010 (though still positive) will be more subdued."With the leading economies pumping so much cash into the system and the likelihood of more to come, this is likely to lead to the reappearance of inflation in many western economies, sometime next year.
"Therefore a place in clients portfolio's for Global Inflation Linked Bonds/Index linked Gilts should be considered providing decent returns on capital and income with low risk."
Mumford believes UK Equities should also be considered but only on a selective basis.
"Sectors such as cyclicals perfomed strongly in 2009 but 2010 is likely to be the turn of companies with strong UK and overseas cashflow, low debt and profitability such as utilities, telecoms and pharmaceauticals. Investors should consider access to these areas through Neil Woodfords UK Equity Income fund.
Bricks and mortar
Peter McGahan IFA with Worldwide Financial Planning believes property could offer great investment returns for 2010."It is very difficult to ignore the potential that commercial property assets have. Most of the bad news has not happened so REITs (real estate investment trusts) will take advantage of this via investment using their considerable cash holdings they have built up along with cash holdings built up via rights issues.
"This coupled with their ability to gear via borrowing will allow them to buy up distressed assets in a market where the overseas investor is very active. 85% of all transactions in the commercial market are overseas investors."
McGahan adds: "Whilst it won't carry the electricity of the emerging markets, the demand will be greater across the board, especially when you consider the interest from pension funds, keen to grab an inflation benefited income."
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