Investment Ideas from Investment Advisers on Rubii

We recently polled a number of the investment advisers listed on Rubii, asking them their views on where people should be investing in the medium to long term. Given the dire state of markets and the global economy, which asset classes, regions, sectors and indeed funds should people be considering right now?

The clear message we had was that now is the time to buy equities, as depressed stockmarkets globally represent a major opportunity, although naturally this will depend on the risk profile and specific goals of the client.

One of the respondents to the Rubii poll went so far as to say now represents the opportunity of a lifetime for investors. Two advisers, meanwhile, warned that investors should drip feed their money in rather than invest lump sums, as markets are still volatile.

Ian Smith of Central Wealth Management was one equity bull, saying that while equities are likely to see six months more pain, they look very attractive right now. "Current values are very low in historic terms around 1930 levels but we do not have a 30s style economy."

Diane Weitz of Ashlea Financial Planning added that historically markets usually recover before the economy in times of recession. Investor in equities, in other words, would be ahead of the curve as the global economy begins to recover. She also remarked that, as America took us into recession, once the housing market has stabilized it is likely to bring us out, too.

William George of Integrity FS also "cautiously suggests" that the US is the region that looks the most attractive at the moment. "Valuations in many high quality stocks have been sold off far too cheaply and don't seem to have been given credit for earnings growth," he claims.

Meanwhile Diane said that companies with good cash flow could be a wise choice given the well-documented problems of liquidity and credit. Adrian Kidd of Unleash Advice Partnership was also keen on companies with cash flow, such as Coke, a hedge against liquidity concerns. 

For regions of the world, Adrian singled out the BRICS economies (Brazil, Russia, India, China and South Africa), which he believes may be oversold. Russia, he believes, also looks cheap if an investor is in it for the long haul.

Sticking to the basic tenets of investment, most of the advisers polled urged people to diversify across a number of regions and sectors in order to spread risk. Alan Dick of Forty Two Wealth Management was particularly strong on this point, saying "there is ample academic evidence to show that market timing simply doesn’t work."

Instead, he argues, "investors shouldn’t try to select the most attractive asset classes at any given point in time but rather should own a well diversified portfolio of asset classes at all times. The portfolio should include the major asset classes of cash, fixed interest, property and equity."

As with asset classes, he continues, investors should not try and pick individual regions or sectors, as the evidence shows overwhelmingly that this leads to suboptimal returns. Instead investors should diversify globally across all regions and all sectors at all times.

Jeremy Newbegin of The Ethical Partnership Limited also said global equities look good value at the moment. "The problem, of course, is that there is a danger that current values will shortly test November 2008's lows so now might not be the cheapest value but today they are still good value."

As well as favouring equities, Diane Weitz also sees an opportunity in investment grade corporate bonds: "In the current climate of low returns from bank deposits, some attractive yields are available from investment grade corporate bonds. The nominal value of the bonds has suffered because negative sentiment and the economic crisis means that a default rate of around 30% has been priced into the bond market. This is worse than the actual default rate on bonds in the Great Depression, indicating that this may be overdone.  The benefit to investors is that they can lock into high yields and also benefit from capital appreciation when sentiment recovers."

Colin Low of Woodward Markwell also likes corporate bonds, "primarily because the equity market will not sort itself out until the debt market does. Also, there has been such indiscriminate selling of assets that quality companies’ debt is trading significantly below par. Both the yield and the capital returns look exceptional."

In a more contrarian take, given the state of the high street, Colin also said retail stocks could offer some genuine upside: "These stocks are sold out massively and yet the retail sales figures are still holding up really well. There is a massive wave of cash that is hitting those with mortgages over the next few months due to interest rate reductions. Although some will be saved, there will be a significant amount that is spent."

Fund Recommendations

William George, Integrity FS

Arch Cru Private Finance

Templeton Global Growth

M & G Global Basis

Black Rock Gold & General

Alan Dick, Forty Two Wealth Management

Dimensional Global Short Dated Bond fund.

Barclays iShares UK property ETF

Global Property REITs ETF

L&G UK Index

L&G International tracker

Dimensional UK Smaller Companies

Dimensional UK Value

Dimensional Emerging Markets

Diane Weitz, Ashlea Financial Planning

Invesco Perpetual High Income