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Two views make a market

We explore how different views make up stock markets.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.


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, %)

Scroll across to see the full chart.

Average fund performance across the major sectors, for 2011 to 2016

Scroll across to see the full chart.

Average fund performance across the major sectors, for the last 5 years

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.

READ MORE

Explore our Investment Times summer 2021 edition for more articles like this.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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