Two views make a market

All information is correct as at 30 June 2021 unless otherwise stated.

In your spring issue of the Investment Times, I wrote about following the experts, not the crowds, and leaving the rest to time.

Leaving your investments to grow over time will always be key in being a successful investor. But sometimes it can be tricky ignoring the crowd.

When those who’ve done well start to brag, it brings attention. More attention brings more investors – pushing the price up of the things that have done well. Sometimes it’s for no good reason, and that can be dangerous.

It’s hard to tell someone who holds a couple of investments that have only gone up that they could be doing things better. But what investors need to remember is investments don’t always go up. Anyone with less than a decade of investing under their belt hasn’t experienced a real bear market, where prices fall by more than 20%. But lots of experts have.

It’s not always easy to know which experts to follow though. Yes, it’s better to listen to the experts rather than the crowds, but experts don’t always say the same things. In the world of investing, there’s a lot to debate. Knowing what to do can be tricky. Just look at the last few years.

Investors have had to contend with a global pandemic, Brexit, two US elections, two UK general elections, and US and China trade wars. They’ve been divisive investment topics with one thing in common – the experts had different opinions on what to do.

What you do with your views matter

Markets work best when there are a number of different views around valuations and risk – you can only buy or sell if someone is willing to do the opposite.

A different view doesn’t mean you’re right or wrong. It’s what you do with your views that matter. Don’t sway to one side too much. Uphold the basic investing principle of holding lots of different investments for as long as you can and you won’t go far wrong.

Investing is personal, but never risk throwing the baby out with the bathwater. Gently tilt your portfolio depending on your view.

Experts might be passionate about sector X or company Y, but you can almost guarantee those aren’t the only things they own.

The table below shows how important having lots of different investments is. Investments, sectors and stock markets come in and out of favour. They might storm ahead of the others in some years, but then tank the next. No one can predict the future top and bottom position. It makes sense to hold small parts of each, adding a little more in the ones you think will do better.

Clash of the Titans

This issue of your Investment Times focuses on how different views make up the market. We’ve put styles, sectors, companies and tax-efficient wrappers against each other, to help you decide which might work best for you.

Remember everyone’s goals and circumstances are different. Investing isn’t a one size fits all approach. Past performance also isn’t a guide to the future. All investments rise and fall in value, so you could get back less than you invest.

Annual performance across the major sectors (end of June to end of June, %)

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  2011-12		2012-13		2013-14		2014-15		2015-16
  UK Government Bonds	15.05%	Europe (ex UK)	31.20%	Europe	13.81%	Japan	17.41%	Global Government Bonds	16.66%
  Global Government Bonds	7.10%	Japan	25.33%	UK All Companies	13.79%	North America	14.83%	Global Corporate Bonds	14.66%
  UK Corporate Bonds	5.23%	North America	24.86%	North America	10.66%	Global	9.49%	North America	14.62%
  Global High Yield Bonds	3.66%	UK All Companies	22.20%	Global High Yield Bonds	8.70%	UK Government Bonds	8.58%	UK Government Bonds	13.81%
  North America	1.83%	Global	21.79%	Global	8.60%	Asia Pacific (ex Japan)	8.56%	Global	7.65%
  Japan	-4.43%	Asia Pacific (ex Japan)	14.14%	UK Corporate Bonds	6.11%	UK All Companies	6.80%	Japan	6.84%
  UK All Companies	-4.73%	Global High Yield Bonds	10.18%	Asia Pacific (ex Japan)	3.54%	UK Corporate Bonds	4.34%	Asia Pacific (ex Japan)	6.41%
  Global	-7.40%	Global Emerging Markets	6.89%	Global Corporate Bonds	2.07%	Europe (ex UK)	4.10%	UK Corporate Bonds	5.86%
  Asia Pacific (ex Japan)	-10.88%	UK Corporate Bonds	6.31%	UK Government Bonds	1.86%	Global Corporate Bonds	2.07%	Global Emerging Markets	5.76%
  Global Emerging Markets	-13.96%	Global Corporate Bonds	5.23%	Global Emerging Markets	1.72%	Global Government Bonds	0.73%	Europe (ex UK)	4.68%
  Europe (ex UK)	-18.49%	Global Government Bonds	0.32%	Japan	-1.57%	Global Emerging Markets	0.44%	Global High Yield Bonds	1.90%
  Global Corporate Bonds	N/A*	UK Government Bonds	-3.38%	Global Government Bonds	-1.83%	Global High Yield Bonds	-1.48%	UK All Companies	-3.98%

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  2016-17		2017-18		2018-19		2019-20		2020-21
  Europe (ex UK)	29.27%	North America	12.39%	North America	11.08%	UK Government Bonds	11.71%	Global Emerging Markets	28.49%
  Asia Pacific (ex Japan)	28.63%	Japan	10.32%	Global Government Bonds	7.80%	North America	8.25%	North America	28.23%
  Global Emerging Markets	27.74%	Global	9.41%	Global	7.33%	Japan	6.62%	UK All Companies	27.65%
  Japan	25.64%	UK All Companies	9.11%	Global Corporate Bonds	7.10%	UK Corporate Bonds	5.73%	Asia Pacific (ex Japan)	26.18%
  Global	24.12%	Asia Pacific (ex Japan)	7.38%	Global Emerging Markets	7.09%	Global	5.60%	Global	26.03%
  North America	23.84%	Global Emerging Markets	4.47%	Global High Yield Bonds	6.69%	Global Government Bonds	5.19%	Europe (ex UK)	23.55%
  UK All Companies	22.72%	Europe (ex UK)	3.14%	UK Corporate Bonds	5.60%	Global Corporate Bonds	4.46%	Japan	13.47%
  Global High Yield Bonds	10.86%	UK Government Bonds	2.07%	Asia Pacific (ex Japan)	4.99%	Asia Pacific (ex Japan)	2.35%	Global High Yield Bonds	10.16%
  UK Corporate Bonds	6.36%	UK Corporate Bonds	0.60%	UK Government Bonds	4.87%	Europe (ex UK)	1.13%	UK Corporate Bonds	3.40%
  Global Corporate Bonds	4.33%	Global High Yield Bonds	0.08%	Europe (ex UK)	3.09%	Global High Yield Bonds	-1.60%	Global Corporate Bonds	3.06%
  Global Government Bonds	0.54%	Global Government Bonds	-0.69%	UK All Companies	-2.12%	Global Emerging Markets	-2.39%	Global Government Bonds	-5.61%
  UK Government Bonds	-0.81%	Global Corporate Bonds	-1.03%	Japan	-3.41%	UK All Companies	-11.21%	UK Government Bonds	-6.98%

Past performance isn’t a guide to future returns. Source: Lipper IM, to 30/06/21, IA sector averages. *Full year performance data not available.