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Where to invest in 2019?

11 April 2019

3 minute read

2018 saw UK equity funds suffer significant outflows due to ongoing Brexit uncertainty. With UK equities out of favour, and historically low interest rates making cash generally less viable as a long-term option, the question as to where to invest has never been more pertinent.

Who's it for? Investors with basic investment knowledge

What you’ll learn:

  • The fund sectors which saw the largest inflows and outflows in 2018.
  • The outlook for the global economy.
  • Where investors should consider putting their money.

2018 saw UK equity funds suffer net retail outflows of £4.9 billion according to data compiled by the Investment Association. The sector was particularly hard hit due to ongoing Brexit uncertainty which continued to weigh on investor sentiment. With UK equities out of favour, and historically low interest rates making cash generally less viable as a long-term option, the question as to where to invest has never been more pertinent.

Disquiet over Brexit has caused a slump in sterling and volatility in the FTSE 100 Index – an index which is predominantly made up of global companies with significant overseas earnings. While Brexit has certainly created some short-term headwinds for these companies, the devaluation of sterling has had the opposite effect, driving up the value of overseas corporate earnings in sterling terms. For investors, it’s important to tune out the noise surrounding domestic politics and focus instead on the prospects for the global economy.

Market outlook

Asia and North American equity funds remained popular with investors throughout last year, until December when most experienced outflows. The outflows were driven by rising expectations of an impending recession amidst a slowing global economy. Global equity markets have since rebounded from their December lows, as incoming economic data helped to banish much of the gloom.

The long-term growth prospects for the world economy look both attractive and reasonably priced. In such a context, now looks as good a time as ever for investors to enter into a long-term investment in global equity markets. The best way to do this is through a diversified portfolio invested across multiple regions and sectors.

Time is on your side

Investments in markets will always experience ups and downs. Some investors may feel these fluctuations in price slightly more than others but only the most stoic individuals will not be tempted to re-think their investment strategy in reaction to significant falls in value. The most valuable weapon investors should have on their side is time. But it’s easy to neutralise this by allowing the market tremors to dictate your investment decisions.

The relevant concern for investors is: will the investment be worth more, when I need the money, than if it was held in cash? History teaches us that ‘based on past performance’ if you don’t need the money for five years or so then the risk of losing money has been very slim (around 10% based on an investment in the MSCI Word Index in US dollars since the end of 1969).

As the time period stretches out to 10 years and beyond there have never been instances where investors have lost money (based on an investment in the MSCI World Index in US dollars since the end of 1969). This may give investors the confidence that they don’t need to jump ship at the first sign of stormy weather. In fact, they would be better served by battening down the hatches until calmer waters return. Note, however, that past performance is not a reliable indication of future performance.

Conclusion

Mixed asset funds were the best-selling asset class in 2018, with £7.9bn in net retail sales. A multi-asset portfolio which invests across a range of asset classes and regions offers a globally diversified one-stop solution for investors. Building a diversified portfolio can be a daunting task but a multi-asset fund can provide a simple solution. Furthermore, with options like Barclays Ready-made Investments, investors can choose the level of risk they are comfortable with.

Our Ready-made Investments are a selection of five Barclays funds that each aims to increase the value of your investments over time, using a broad mix of asset classes from across the globe, using a combination of index tracking funds which keeps costs low for you.

Each Ready-made Investment is a choice from a range of Barclays funds that invest in different areas and types of investment around the world according to Barclays’ Strategic Asset Allocation model. Asset allocation is the way investments are organised across broad types, such as shares and bonds. Our Strategic Asset Allocation model is the mix of assets that we believe has the best chance of achieving specified financial goals over the longer term.

These are our current opinions but the future, as ever, is uncertain and outcomes may differ. Designed for the long term, you should only be thinking about holding these investments for at least five years.

Find out more about our Ready-made Investments

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances. Smart Investor doesn’t offer personal financial advice. If you’re not sure about investing, seek independent advice.

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