Where to put Your Money

With interest rates low but much uncertainty flowing round the markets, Tom Anderson looks at potential ways to find that elusive return

Many people have noticed that interest rates on their cash accounts are almost nothing, but are concerned about the volatility of investment markets.  If you decide that you want to risk your capital outside a cash account, then what do you buy that might offer some growth?

Buying stocks might be too risky for individual investors so funds might be more suitable.  These are single entities that buy a range of assets within them so rather than trying to pick one single company, investors get the benefit of diversification and also the advantages of specialist fund management.  Funds can cover a range of geographical markets or industry sectors, but the following ideas have rather specialist mandates that would either act as a start-point for a speculative investment account or add depth to an established, diversified portfolio:

For those who want an established name:

  • Rothschild Capital Partners (RCP-LON) acts as the vehicle for the wealth of the Rothschild family.  This alignment of interests is reassuring and offers something a bit different from geographical or sector-based funds because it invests in a widely diversified international portfolio.  This includes a range of asset classes such as public and privately-listed equity, absolute return, credit and currencies.  It can also hold cash whilst offering an income yield of about 2 per cent.  Ongoing charges are about 0.75 per cent.

For those believing in tomorrow’s world:

  • The Scottish Mortgage Investment Trust (SMT-LON) has very little to do with either Scotland or mortgages, but tries to identify businesses that have sustainable competitive advantages in their industries and which are capable of growing earnings and cash flows at a faster rate than the market average.  This leads to an eclectic mix of ideas, but the portfolio is focused specifically on companies benefitting from the transformative change occurring in areas such as e-commerce, social media, healthcare, transportation and energy.  The largest holdings include Amazon (12 per cent of fund), Baidu (5 per cent), Facebook (4 per cent) and Tesla Motors (4 per cent).  Ongoing charges are about 0.5 per cent.

For the optimistic cynic:

  • The Personal Assets Trust (PNL-LON) has been very defensively positioned for some time but can seek out whatever will achieve growth in capital and income in real terms over the longer term.  The trust is not constrained to stocks, but can invest in equities and fixed interest securities as well as other collective investment schemes and money market instruments.  However, it is currently very defensively placed, with major holdings in cash (20 per cent of the fund) and physical gold bullion (10 per cent).  Ongoing charges are about 0.9 per cent.

As to performance indicators, the following chart of three year relative performance against the MSCI World Index is probably as good as any:

You will notice that the very defensive PNL had a long period of underperformance against a rising market, but been able to grow throughout the market shocks over the last twelve months.  SMT has had some dramatic falls earlier this year but has really strengthened recently.  RCP has also come off from its recent highs, but held value much better than the wider market and reaching new highs.

All of these are risky.  Although they have the potential for growth you could lose all your invested money. riddle_stop 2

 

Tom is a Chartered MCSI, FCA regulated investment advisor.

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