You are here: Home - Investing - Experienced Investor - News -

The one top tip for investors in 2017: ‘go niche’

Written by:
Investors should ‘rethink the obvious’ and consider more niche equity and bond opportunities next year, according to one investment expert.

Darius McDermott, managing director of fund platform Chelsea Financial Services, believes the volatility seen in both equity and bond markets this year will increase in 2017, and says the only solution is for investors to opt for more specialist investments.

“With no major asset class looking particularly attractive right now and markets too complacent for my liking, my first tip for 2017 is a simple one: make sure your portfolio is diversified,” McDermott said.

“However, I don’t think the usual rules will apply to that diversification, given bonds yields are already at very low, or even negative levels, and that stock markets are moving very much in tandem at the moment. So my second tip is to rethink the obvious and specialise more.”

Three niche equity ideas

The first specialist sector McDermott likes is infrastructure, which he says has come to the fore as government policy around the world has begun to shift from monetary to fiscal stimulus.

“Many projects are backed by governments and long in tenure, making the sector less volatile than the wider market,” he said. “Yield can also be found. I like VT Infrastructure Income and First State Global Listed Infrastructure.”

He says the insurance sector is less talked about but offers similar characteristics.

“Many contracts are a legal requirement, so demand is steady, making the industry less volatile generally. A more modest but steady yield is also available. I like Polar Capital Global Insurance.”

On a country-specific basis, India is still his long-term favourite.

“The recent cash crackdown to tackle fraud has led to a slight sell off, but government policies are pro-business and it is an oil importer, not exporter, with a big domestic economy and fewer ties with the US than many other emerging markets. I like Ashburton India Equity Opportunities and GSAM India Equity Portfolio.”

For more, read: Is now the time to unlock India’s potential?

Two niche bond ideas

When it comes to bond investing, McDermott favours two extreme ends of the spectrum.

“Bonds with short duration would be less sensitive to rising yields and inflation – if it starts to come through. And cash made from maturing bonds can be put to work straight away into others with higher yields. I like AXA Sterling Credit Short Duration,” he said.

“At the other end of the scale, a higher yield may potentially compensate for the impact of any capital losses and inflation. I like Aviva Investors High Yield Bond and GAM Star Credit Opportunities, which are yielding 4.9% and 5.4% respectively.”

One niche alternative idea

McDermott also picks targeted absolute return funds, which he says can add diversification to a portfolio.

“It’s an area that always attracts negative headlines, but there are some very good funds to be found in this space. I like Premier Defensive Growth, which may be a good one-stop shop for nervous investors with smaller pots of money, and Smith & Williamson Enterprise.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week