Interactive Investor

Jeff Prestridge: how to keep growing your personal wealth

Experts are talking the market up, but our cynical columnist offers some sensible advice for investors.

2nd December 2020 10:14

Jeff Prestridge from interactive investor

More and more experts are talking the market up, but our cynical columnist offers some sensible advice for UK investors.

In these miserable days of tiers and tears, it is difficult to remain optimistic. Switch on the radio as I do every morning at 5.30 in order to listen to the start of Radio 4 - and the early morning news - and you are immediately hit by wave upon wave of doom and gloom. 

Sometimes I feel like throwing my radio into the nearby River Loddon. Sometimes, I feel like joining my Logik Digital radio in the Loddon.

If it’s not scientists imploring us to steer clear of elderly parents this Christmas (no chance), it’s yet more carnage on the High Street and yet more redundancies. Yes, we’ve got the coronavirus vaccine cavalry charging over the horizon, but there is much economic pain ahead, that’s for sure. Maybe less or even no tiers to look forward to, but plenty more tears coming our way. Economic shrinkage. Unemployment heading towards 2.6 million by the middle of next year – as outlined by Chancellor Rishi ‘Dishy’ Sunak in the recent government Spending Review. Enough is enough.

Against this challenging backdrop, I find it hard to absorb – and believe - any personal finance optimism that comes my way. It doesn’t feel right. Yet it has headed in my direction in recent days, especially from investment experts who prefer to concentrate on the future than the present. Maybe they are born optimistic or it is a requirement of their job, but they seem to think that the future outlook for both the economy and the UK stock market is pretty good.

Indeed, they say that the UK stock market is the place to be right now. It’s undervalued compared to its international counterparts (America especially) and once Brexit is out of the way (irrespective of deal or no deal), international investors will start buying into the market in droves. Shares in some – not all – UK-listed companies will surge as a result.

Add in mass vaccinations and an economy returning to a semblance of normality – and, say the experts, you have all the ingredients to make a healthy stock market.

Over the past couple of weeks, I’ve spoken to a lot of investment experts and fund managers. Although some are naturally guarded about predicting where the market goes from here, others aren’t. But the overwhelming sense is one of bullishness rather than bearishness.

Let me give you a flavour. Tony Yarrow, of Oxfordshire-based asset manager Wise Funds, says that the FTSE 100 Index could reach 8,500 by the end of next year.

“Maybe the men in white coats will take me away,” he says, “but when the recovery in the UK economy comes, it will be extreme and the impact on the stock market will be overwhelmingly positive.”

Then there’s Alex Wright, who in recent years has had a difficult time overseeing investment fund Fidelity Special Situations and its sister investment trust Special Values (LSE:FSV). In a recent webinar, he talked with confidence about a strong market ‘rebound’ triggered by three ‘catalysts’ – the imminent roll-out of coronavirus vaccines, an end to all the Brexit shenanigans, and renewed overseas interest in UK shares.

Wright believes there is some outstanding value to be found in the UK stock market. It’s a view shared by fresh-faced Kartik Kumar, manager of investment trust Artemis Alpha (LSE:ATS). Although unprepared to talk about where the index is heading, he believes the market looks ‘attractive’.

All very positive for private investors, many of whom will have most of their ISAs and self-invested personal pensions (SIPPs) invested in the UK.

Why aren’t I feeling as ebullient as Tony Yarrow, Alex Wright and Kartik Kumar – and for that matter the fund expert who is convinced the FTSE 100 index is heading stratospherically towards 9,400 on the back of the market being at its cheapest versus the rest of the world since 1973?

Well, for a start, journalists are notoriously cynical – and so tend to look more on the negatives than concentrate on the positives. More half-empty than half-full.

But more importantly, stock markets rarely take heed of expert opinion. They are a law unto themselves. Just hark back to this time last year – when Boris won the general election with a thumping majority. All the experts then talked about the prospect of a booming UK stock market. 

Of course, Covid-19 put an end to that. We had no idea what was around the corner last year – and we have little idea what is awaiting us in 2021. China marching into Taiwan? War in the Middle East? 

So, yes, keep investing, but don’t just bank on a rip-roaring UK stock market to keep your personal wealth heading in the right direction. Diversify. Invest in overseas equities, invest in other assets and keep some money in the bank.

Hopefully more from me in the New Year. Merry Xmas. Time to change from Radio 4 to Radio 3. 

Jeff Prestridge is personal finance editor of the Mail on Sunday. He is a freelance contributor and not a direct employee of interactive investor.

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