A few years ago an FT columnist suggested investing in Russian funds.
I wasn’t tempted but in 2018 I bumped into my godson’s father at a lunch in the City. He has experience of investing in emerging markets and said he wished he had more exposure to Vietnam. I was tempted. So far it has turned out very well. I sold Shell above £26 and bought three Vietnam funds. Shell is below £20 in spite of the strong oil price and the Vietnam funds are up by more than 60%.
I am lucky not clever. I thought I was spreading my risk buying three funds. Country risk didn’t occur to me. If something goes wrong in Nam they will shrivel to the size of grape pips. This is what investors in Russian funds have found. I might have bought JP Morgan Russian Securities and funnily enough at the end of January this year I would have been up almost 60%. What a difference a month makes. This is the picture last Friday and no doubt it will be worse when the Russian stock market re-opens.
Now I’d like you to take a look at two investment trusts and tell me which you’d rather be in.
Let me guess. You want B. However, if you really did hold B today you would be quite cross because you have seen it fall by a third and you’d forget all the gains it made in previous years. You would fret that Scottish Mortgage, for that is the identity of B, was above £15 and now is below £10. A successful investor should cultivate insouciance to rival Sir Percy Blakeney, shrugging off volatility. If, like me, you are a bit timid, you can always take out insurance with a dollop of fund A: Steady Eddie, Personal Assets. I hold both funds.
I booked a loss in M&S last year and switched to Babcock. Subsequently M&S outperformed Babcock but now the former is below where I sold it and the latter higher. I don’t want to be one of those hard-faced men who did well out of the war (Put Out More Flags, Evelyn Waugh) but there’s more money in defence than prawn sandwiches right now.
I don’t know who coined the phrase “fear and greed”. JK Galbraith’s novel I mentioned the other day is about this psychological phenomenon and now there’s an index. It tracks seven indicators of investor sentiment.
I imagine the F&G needle has fallen further into the red since the end of last month. It reminds me of my grandfather tapping the barometer in his study and announcing the weather is improving – for the worse.