It’s been another turbulent week for markets, with FTSE ending one day ahead only to hand back its gains in the following session. Keeping on top of day-to-day movements is a tiring job, but not one that should keep the true long-term investor up at night.
The bulk of investment commentators are persistent in reminding investors to stay calm amid the ongoing volatility and keep an eye on their goals that are 10, 15 or 20 years away. One of our weekend articles will look closer at some rules for investors to keep in mind during volatile markets.
Psigma chief investment officer Tom Becket said earlier this week: “We maintain our view that these remain attractive markets, due to the combination of economic recovery and monetary assistance, but we would state that ultimately markets will need proper economic growth and decent earnings achievements to justify current valuations.
“If it is not forthcoming then there is the chance that investors might start to believe that the omnipotent central bankers have started to lose control and the ‘love triangle’ relationship has broken. We hope that is not what markets have been saying for the last three weeks and that the summer squall gives way to a better autumn. For now that is what we expect, but we stand by ready to change tack if necessary.”
With that in mind, we’ve rounded up a selection of our best articles of the week below. From everyone on the FE Trustnet team, have a great weekend.
The best performing UK income funds for dividends and dividend growth
News editor Alex Paget put the IA UK Equity Income sector under his microscope this week and found that just 36 per cent of its members have managed to grow their dividends in each of the last five calendar years.
As the table below shows, the top five performing funds in that respect have been M&G Charifund,JOHCM UK Equity Income, Standard Life Investments UK Equity Income Unconstrained, Fidelity MoneyBuilder Dividend and Trojan Income.
Source: FE Analytics
All five funds of the above funds have handed out more in income than the average UK equity income fund, excluding those which use covered call options such as Schroder Income Maximiser, where the average pay-out has been £2,679.17 on an initial £10,000 investment between January 2010 and the end of 2014.
Furthermore, the funds have beaten the IA UK Equity Income sector and the FTSE All Share from a total return point of view over the last five years. Have another read of the story for a deeper look at these funds.
GARS breaches £40bn: Should investors be worried by its ever growing size?
The total assets being run under the Standard Life Investments Global Absolute Return Strategies banner has now passed the £40bn mark, so this week we asked whether investors need to be concerned by the ever growing size of the popular fund.
A recent FE Trustnet study highlighted it has been one of the worst performing funds in the sector since April over which time the FTSE 100 has fallen 15 per cent, which will have no doubt frustrated many of its unitholders who were using GARS to protect their portfolio against general market weakness.
However, many of the investors we spoke to about the fund said they are no too concerned by its size as it invests in mainly in derivatives in very liquid markets.
Ben Willis, head of research at Whitechurch, said: “You just have to keep an eye on it. The team were still managing to meet their objectives when they were a bit smaller and I think there’s every chance they can do it at £40bn. We’re not overly concerned at the moment.”
“The fund size could become a problem at some point. If we didn’t believe the liquidity was there, then we’d definitely be more concerned. If there were large swathes of the fund in direct assets – buying shares in companies rather than using derivatives – then there’d be more of a concern. But right now it’s just one to keep an eye on.”
Performance of fund vs sector and indices since launch
Source: FE Analytics
How are multi-asset funds coping with a volatile 2015?
It’s fair to say that UK investors have witnessed a fair amount of volatility this year, with markets being rocked by events such as the general election, the Greek debt crisis and the recent China-induced market plunge.
With this in mind, reporter Lauren Mason looked at which funds from the Investment Association’s four multi-asset sectors have fared over 2015, so far.
In the IA Mixed Investment 0%-35% Shares, which is deemed to be the lowest risk sector, the JPM Cautious Managed has made the highest return year-to-date – outperforming its average peer by 3.2 percentage points to provide a return of 2.77 per cent.
Performance of fund vs sector and benchmark in 2015
Source: FE Analytics
In close second place for performance is the four FE Crown-rated Jupiter Distribution fund, which is managed by Rhys Petheram and FE Alpha Manager Alastair Gunn, and has returned 2.02 per cent so far this year.
To see which funds are topping the remaining three sectors, please take another look at the original article.
Are all assets expensive? Four areas where there’s value – and funds to play them
Many investors hold the view that large parts of the market are overvalued after the ultra-loose monetary policy of the world’s central banks post-financial crisis pushed up the value of most assets.
However, Capital Economics chief markets economist John Higgins argues that there are several areas of value remaining, especially after the recent market sell-off, although this does not mean that future falls are less likely to take place.
Higgins said: “To some, the recent sell-off in global financial markets was merely the beginning of what will soon become a much bigger downturn, because the valuations of many assets remain excessively high.”
“However, our view is that valuations are generally not very stretched, even that of China’s stock market following its tumble. Indeed, in some cases, the valuations of assets are now unusually low. Needless to say, this does not preclude further falls in their prices, but it may cushion the downside.”
The economist highlighted emerging market equities, US equities, higher-risk bonds and commodities as parts of the market that appear to be on especially attractive valuations at the moment and in this article we looked at the reasoning behind this.
10 tips for surviving stock market crashes
Although the FTSE has made back much of its losses from ‘Black Monday’, the general consensus is that the volatility is likely to continue for the foreseeable future – and it would take a brave person to rule out further falls.
As a result, Frazer Wilson, senior consultant at Thomas Miller Investment, has put together a 10-point checklist for investors on how to deal with the volatility.
Although it is probably more suitable for novices, more advanced investors could do worse than remind themselves of some of the timeless principles covered by Wilson – most important of which is probably: “Don’t panic!”