FTSE 100: 7409.64 ▼ -7.60 (-0.10%)
Nearly two years ago Citywire entrusted me with £10,000 to invest in a portfolio of investment trusts. This is the latest in a series of videos in which I talk about the challenges and opportunities I encounter.
In this video, I explain how, having gone a bit defensive at the start of the year, I'm taking advantage of the post-Brexit drop in the markets to become a little more adventurous, though I remain concerned with at least two of my holdings which have suffered.
This video refers to the following investment trusts:
'Any opinions expressed in this video do not constitute a personal recommendation to you to buy, sell or subscribe to any particular investment and should not be relied upon when making (or refraining from making) an investment decision.'
Hello, finally with the European Union referendum out of the way I can turn my attention to my Top Trusts portfolio.
Uncertainty over the outcome draped over the UK stockmarket like a wet blanket this year, forcing investors to the sidelines.
Now the eerie calm is shattered, markets are in turmoil and there are almost too many things to consider!
I have to say my emotions are mixed as I consider my holdings in six investment trusts following the shock result to leave the EU.
As a citizen I’m appalled that the decision to turn our backs on our European neighbours was taken with so little planning or consideration of the implications for the UK and its standing in the world.
My hope is that our two main political parties choose leaders up to the challenge of healing a divided country, dealing with the constitutional nightmare the result has provoked while negotiating a good exit from the EU. That’s a tall order though.
However, as an investor I’m more positive.
The day of the result saw the pound plunge and the FTSE slide but while these wiped billions off the value of investments they also created many buying opportunities.
The decline in sterling is good for UK companies with overseas earnings whose value will be boosted when converted into pounds.
While the possibility of a recession has hit shares in domestically-focused companies, it could leave some vulnerable to takeover bids from foreign predators. An M&A boom could result from prolonged sterling weakness.
Also ringing in my ears were the words of James Anderson, joint manager of Scottish Mortgage Trust, which I hold, a global fund with a track record of identifying some of the world’s fastest growing companies.
This perennial bull told investors last week he had never seen so many great, transformative companies
‘There are more reasons to be excited about companies than at any point in the history of capitalism.’ James Anderson, Scottish Mortgage Trust]
He also urged investors to think of the long term and not get fixated on single events like Brexit.
‘I don’t think our companies in Europe and the UK have anything to do with this [Brexit.’ James Anderson, Scottish Mortgage.
I think he has a point and, strange as it may seem, I’ve sold my core defensive holding in Capital Gearing Trust, which has served me well since I bought in January.
I considered ploughing the £2,500 into Scottish Mortgage but it’s quite a high risk fund and so instead I plumped for its £2.4 billion rival, Foreign & Colonial.
Foreign & Colonial is famous as the country’s oldest investment trust, launched back in 1868. It’s a more diversified fund than SMT but like it also has low exposure to sterling.
It’s cheaper than SMT too. At the end of last week the shares closed just over 11% below net asset value, a bigger than normal discount.
My work is not done. I’ve got concerns over two of my previous winners:
Jupiter European Opportunities and Henderson Smaller Companies which have fallen heavily this year. Now is not the time to quit these stock pickers but I do worry about their position should investors turn tail from their sectors.
I need to do some more research before considering my position.