A friend has a relatively small amount of money to invest and has asked my advice. He already has a much larger conservatively invested portfolio and would like to diversify. He is after capital growth and not worried about income.
Last month the FTSE 100 had a small setback, by no means the substantial correction that may lie in store. It is holding above 7,000 and one scenario is that it continues around this level for some time. However, with disruption to trade between the UK and EU seeming increasingly likely and President Trump’s mooted tariffs I suspect there will be a move down to around 6,500 or lower. A third, to my mind most unlikely, scenario is a rally to fresh highs later this year.
So what’s my advice? As I have mentioned more than once I see the best chances for growth in Emerging Markets in the Far East, including India and Bangladesh. Even if I could pick companies to invest in, it would be virtually impossible, certainly very expensive, to buy shares in these overseas markets. So this means letting somebody else pick the stocks in a managed fund. Here are the ones I hold.
McInroy & Wood Emerging Markets Unit Trust. I first invested in 2007, when the fund started, and bought some more in 2011. My original investment has more than doubled.
Pacific Assets Investment Trust. It has gone up 8% since I bought in November 2016. It has underperformed investments in Europe and the US by a wide margin but I take a long view. It is overweight in India and underweight in China which sets it apart from other similar funds.
Aberdeen Asian Smaller Companies Investment Trust has been my most disappointing foray into the Far East. Since buying in 2013 it has gone up a measly 5%.
Last June I dipped a toe into Japan via the Aberdeen Japan Investment Trust. It has gone up an underwhelming 7% but I’m charmed by diversification into that market.
Now, if you are friendly to the American market try this Non Emerging Market fund, invested 65% in N America, 15% in Europe and 12% in Emerging Markets: Worldwide Healthcare Investment Trust. I first bought this in April 2014 on my broker’s advice and it has just about doubled in value, so brokers can sometimes be on the money.
So what should my friend do? He could place an each way bet by investing in M&W Emerging Markets, Pacific Assets Trust and Worldwide Healthcare; then sit back and see how they perform. He could stay in cash and see if markets fall but the only cash I like is Johnny.