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Millennial investor: how can I protect my money from a recession?

Finding a tenner on the street is a nice surprise that is quickly forgotten: but losing £10 leaves a bitter taste that sticks with you much longer. The same is true of investments.

Article originally published by The Telegraph. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

Finding a tenner on the street is a nice surprise that is quickly forgotten: but losing £10 leaves a bitter taste that sticks with you much longer. The same is true of investments. 

Luckily, the four funds I’ve invested in since January are currently up by around 6pc so I haven't had that feeling of loss yet, but it looks like I might be in for a rollercoaster ride ahead.

The British stock market took a pummeling recently and was hit by its biggest fall in one day since the Brexit referendum  following whispers from economists of “recession”. These are now turning into shouts and the thinktank Resolution Foundation has warned that we now face the highest risk of entering an economic slump since 2007.

What would that mean for my mission to use the stock market to fast track my way onto the property ladder and turn my £10,000 inheritance into a deposit on my first home?

Well, I certainly won’t be complaining if house prices come crashing down, but seeing my investments plummet would be painful. If, for example, the £7,000 or so I have invested so far dropped in value by 50pc to £3,500, I’d have to double my money again just to get back to where I was. 

But the possibility of an impending downturn doesn’t mean I should back out of investing entirely. Although the British stock market tumbled by almost 30pc in 2008 during the crash, analysis by Fidelity, an investment manager, found it wasn't the case everywhere.

Its Japanese counterpart fell by barely 2pc while the value of global government bonds shot up by more than 50pc. This just goes to show that, even in a general slump, not all sectors and markets will crash. 

So what do we buy in hard times? One thing that we all need – come recession or not – is healthcare. What’s more, population growth is exploding and we’re living longer ; so companies creating drugs and medical technologies are going be more vital than ever. 

This is why I’ve chosen to invest £600 in Worldwide Healthcare, an investment trust which seeks out the best pharmaceutical and biotechnology companies around the world. It manages more than £1.4bn of investors’ money, funneling this into innovative firms such as Novo Nordisk, a Danish company which is pioneering new drugs to better tackle diabetes and other chronic illnesses.

The trust had a rocky 2018 but, according to one of its two managers, Dr Trevor Polischuk, the team is now taking a new approach and moving away from investing in larger pharmaceutical companies in favour of emerging biotech firms which have more potential to grow.  

I was weighing up between a few other healthcare options, including JPMorgan's Global Healthcare fund and the Polar Capital Healthcare Blue Chip fund. These two have performed well over the past few years; but what I like about Worldwide Healthcare is its longevity.

It was set up the year I was born (we’ll both be celebrating 25th birthdays in 2020) and over the past decade has made returns of 382pc. That means that if I’d invested the £10,000 I inherited from my granny in Worldwide Healthcare ten years ago, and reinvested any dividends I got, I’d now have £48,290 – more than hitting my target of £40,000 for a house deposit (10pc of the value of the average London home). 

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I’d also benefit from lower fees with Worldwide Healthcare. It takes a cut of 0.9pc of my investment each year, while the JPMorgan and Polar Capital funds both charge over 1pc. Part of that 0.9pc is a performance fee that I pay if the fund does well; if it doesn’t, I’ll be charged less. 

Even better, because it is run as an investment trust rather than a fund, the price you buy in at can vary depending on how much other investors are willing to pay. I managed to buy in at a slight discount: that is, I paid a lower price for my shares than the shares are actually worth.

I also intend to add more money into the trust in gradual installments, as part of my wider investment plan. By drip feeding my £10,000 (plus £200 of extra monthly savings) into investments, I believe I can smooth out any sharp rises or falls in global stock markets and ride out the rollercoaster.

And, after all, it’s a rollercoaster that, overall, has been going up. Even if you invested in the British stock market on September 10, a couple of days before the Lehman Brothers investment bank collapsed – widely considered to mark the beginning of the 2008 financial crisis – you’d still have seen your money grow by around 117pc by now.   


This article was written by Marianna Hunt from The Telegraph and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Article originally published by The Telegraph. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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