Our funds analysts discuss the options for investors during times of crisis.
The spread of coronavirus is another key example of how an unexpected high-risk event can potentially have an impact on markets and the overall economy.
Teodor says: “The best antidote for investors’ portfolios is diversification, not just in terms of regional exposure but across different asset classes and currencies too.
“One option is to take at least some risk off the table, locking in gains, and to look to asset classes that might introduce additional diversification benefits into a portfolio. This would include bonds, alongside traditional haven assets such gold. A cash alternative via short term bond funds may be another area to focus on.
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“Bonds are often regarded as being lower risk and negatively correlated to equities, and therefore could provide some protection in a market downturn. One such fund is the Marlborough Global Bond fund, which features on our super 60 rated list. It is managed by the highly experienced manager, who employs a relatively cautious approach, designed to capture upside while limiting effects of market falls by investing in government and corporate bonds around the world. The portfolio is well-diversified and includes more than 400 bond issues, spread across multiple geographies, credit ratings and duration. Currently, the fund is weighted towards UK and US bonds with sterling and the US dollar being the largest currency exposures.
“Gold is also traditionally used as a hedge during market uncertainty. The easiest way to gain exposure to this theme is buying an ETC and in this category we favour the iShares Physical Gold ETC – another cost effective Super 60 rated fund.
“Last but not least, cash is considered by many as almost completely risk-free. However, instead of piling it in their portfolio, investors could allocate some proportion to money markets and ultra-short dated bond funds as a tactical move. iShares Ultra Short-Term Bond ETF is a passive example of such a strategy that may provide both returns and greater diversification.”
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