You are here: Home - Investing - Getting Started - News -

BLOG: Building a balanced portfolio for 2021

0
Written by: Darius McDermott
17/12/2020
2020 really has been the strangest 12 months of my 25 years in financial services. But I’m broadly positive going into the new year.

I’ve seen a few stockmarket crashes in my time, but nothing like the one we saw when the pandemic rocked global markets to their foundations over the course of three weeks in February and March.

Since then, the world has almost had to find a new way of working as it continues to grapple with Covid-19. Although the global economy is now in recession, with job losses continuing to mount, I’m actually broadly positive going into 2021. We have more than one vaccine in the offing, Brexit will be completed one way or another, and we have an incoming US president who is likely to be less ‘unsettling’.

Don’t get me wrong, there are going to be many more bumps in the road, but we can actually see some light at the end of tunnel – particularly with central banks and governments around the world fully committed to supporting a recovery.

With this in mind, I thought I’d build an example of a balanced portfolio that could serve investors well in 2021. Please note that these funds and allocations are just suggestions and may not be suitable for all types of investor.

Core holding – Rathbone Strategic Growth Portfolio – 40% of the overall portfolio

With uncertainty still rife it’s probably a good idea to hedge bets somewhat by having a fund with a proven ability to limit the damage when markets fall.

Managed by David Coombs, the Rathbone Strategic Growth Portfolio fits the bill as a potential core holding. It targets cash plus 3-5% per annum over a minimum five-year period and has a big focus on delivering this via a risk-controlled framework. It’s also well diversified and relatively cheap, with an ongoing charge of 0.65%.

Going global – JOHCM Global Opportunities – 20%

You can never really go wrong with flexibility – so a global fund is almost a must have in the portfolio.

Managed by Ben Leyland, this 30-40 stock fund has a strong bias towards larger and medium-sized multi-national businesses. The philosophy of this fund is ‘heads we win, tails we don’t lose too much’, and, if markets do struggle again, I believe the fund’s strict valuation process will help in this regard. The manager can also hold large cash positions if valuations are unattractive.

Income and value – Schroder Recovery – 15%

Killing two birds with one stone, I’ve also chosen the Schroder Recovery fund. This is because not only do I expect dividend payments to pick-up in 2021 (following the mass cuts this year) but this fund also has a value-style of investing which means the managers look to find companies that the market has been underestimating.

To find these companies, the team will perform in-depth analysis on a company’s financial statement, looking to answer seven key questions ranging from how a company turns profits into cash, to how well it can manage its debt levels.

Corporate not government bonds – Artemis Corporate Bond – 15%

When it comes to bonds, I prefer investment grade and high yield funds, which offer better yields and again should do better in a recovery environment.

For this part of the portfolio I really want an experienced manager such as Stephen Snowden who runs the Artemis Corporate Bond fund. With an excellent track record in the asset class, Snowden combines his knowledge and understanding of the macro-economic backdrop with his credit analysis and technical understanding of the bond market.

Tapping into emerging markets and Asia – Matthews Pacific Tiger – 10%

Not only are long-term secular trends like demographics and the rise of the middle-class benefiting Asia, there are also some recent trends that indicate a positive outlook for 2021.

Asia in particular has generally handled the pandemic well and has just struck a new inter-regional trade agreement. The Matthews Pacific Tiger fund’s philosophy is to ignore short-term economic noise and focus entirely on the long-term.

Fund manager Sharat Shroff and his team invest in high-quality, capital-light businesses, with good corporate governance, and will typically have a bias to consumer-facing businesses.

Darius McDermott is managing director of Chelsea Financial Services

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.

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Coronavirus and your finances: what help can you get in the second lockdown?

News and updates on everything to do with coronavirus and your personal finances.

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.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
England’s eased Christmas rules remain but PM stresses ‘personal responsibility’

The Prime Minister said it would be “inhumane to ban Christmas” as he confirmed the special relaxation of restrictions over...

Close