Interactive Investor

Ian Cowie: potential Covid-19 cure turbocharged my ‘forever fund’

Our columnist on how this week his net wealth rose more in one day than over the course of typical year.

12th November 2020 10:12

by Ian Cowie from interactive investor

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Our columnist on how this week his net wealth rose more in one day than over the course of typical year.

Ian Cowie

What a wonderful week it has been for investors, inverting the regulators’ copperplate caveat. Stock-market shock: share prices may rise without warning and you might get back more than you invest.

Paper profits are not the same as money in the bank - because you haven’t really made a penny until you sell - but it remains uplifting to see your net wealth rise by more in one day than over the course of a typical year. That’s what happened to me on Monday (9 November).

Just one day earlier, I had explained elsewhere why I am optimistic about a cure for the coronavirus and remain almost fully invested; because, by contrast, pessimists are effectively betting that all the governments, scientists and pharmaceutical companies of the developed world will fail. Their gloomy view doesn’t just break a fundamental rule of investment - “don’t fight the Fed” - but doubles down on it globally.

Rarely have the optimists triumphed so soon. Monday’s news that the end of the world might be postponed by a Pfizer (NYSE:PFE) vaccine for Covid-19, that is said to be 90% effective, propelled both the FTSE 100 benchmark of Britain’s biggest shares and the Dow Jones index of American blue chips nearly 5% higher.

Coming down from the clouds, my “forever fund” saw three of my shares in the same industry deliver double-digit percentage gains in one day: tonic-maker Fevertree Drinks (LSE:FEVR), the spirits giant Diageo (LSE:DGE) and brewer Heineken (EURONEXT:HEIO). Fevertree remains a top 10 holding, despite years of profit-taking. Cheers!

Investment trust winners included BlackRock Latin American (LSE:BRLA), JPMorgan US Smaller Companies (LSE:JUSC) and Vietnam Enterprise Investment (LSE:VEIL), which surged by more than 7%, 6% and 5%, respectively. Talk about a turn up for the books!

More seriously, investing internationally to create a diversified portfolio of assets should diminish our exposure to risk, while giving us some exposure to rewards wherever they arise. Whether we are looking for income or growth or a mixture of both, experience teaches investors to expect the unexpected. 

This raises the important point that some of the biggest losers from the coronavirus crisis will also be the biggest winners if a cure is found. Carnival (LSE:CCL), a cruise ship operator, has been sinking lower in the water all year. But it steamed ahead of all my other winners on Monday with a 39% gain in one day.

Who says investment is boring? Funnily enough so many people do mouth this banal opinion that it has become a cliché. 

At the risk of sounding like Nathan Detroit in Guys and Dolls, I argue the contrary; that stock-market investment is “the biggest game in town”. Better still, it is a bit of a blood sport with serious consequences for winners and losers.

When investors are right, we get richer; when we are wrong, we get poorer. Without wishing to brag, it would appear that I have been right most of the time for more than a quarter of a century. Nor is there anything unusual about that.

Every year, the Barclays Equity Gilt Study reminds us that, since 1899, if you could remain invested in shares reflecting the changing composition of the London Stock Exchange for five consecutive years, there was a three-in-four probability you would do better than bonds or deposits. Against more than a century of evidence, most Britons continue to regard the City as a glorified casino where the odds of winning or losing are no better than tossing a coin.

To be fair, I must disclose some disappointment. I had looked at Pfizer last year but decided against investing. Instead, I preferred to build my exposure to Worldwide Healthcare (LSE:WWH), a top 10 holding by value, and then International Biotechnology (LSE:IBT). Both trusts offer diversified exposure to these sectors where, candidly, this non-scientist knows next to nothing.

Sad to say, neither trust lists Pfizer among its top 10 holdings. However, I really mustn’t grumble because WWH, which I have held for more than a decade, delivered total returns of 505% over that period, 108% over the last five years, and 35% over the last year, according to Morningstar. IBT delivered 597%, 89% and 40% over the same periods, which remain somewhat academic for me because I only invested last April.

You could say that this week Pfizer put a smile on the face of many people with a few bob in the market who can’t remember the last time they enjoyed a rise like this. More seriously, I would say that many women and men spend most of their lives working for money, but investing in the stock market is a way to make money work for us.

Ian Cowie is a shareholder in Blackrock Latin American (BRLA); Carnival (CCL); Diageo (DGE); Fevertree Drinks (FEVR); Heineken (HEIO); International Biotechnology Trust (IBT); JPMorgan US Smaller Companies (JUSC); Vietnam Enterprise Investments (VEIL) and Worldwide Healthcare (WWH) as part of a globally diversified portfolio.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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