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Buy low, sell high: will it finally pay off in 2016?
The last couple of years haven't rewarded contrarian investors. So should you just buy more of the same in 2016?
by Daniel Grote on Jan 06, 2016 at 11:12
For all the uncertainties that lie ahead in 2016, many investors’ outlook for the year will depend on the answer to one question: can we expect more of the same?
While global markets have largely traded sideways over the past couple of years, that hides wildly divergent trends for defensive, income-producing assets and growth stocks, which have become ever-more expensive, and anything to do with commodities, which has been hammered.
The ‘buy low, sell high’ mantra would dictate that 2016 would be the year to scoop up bargain-basement miners and oil stocks. But then you could have said the same thing at the beginning of 2015.
Over the last couple of years, it hasn’t paid to take a contrarian approach to investing. To beat the index, it’s only really been necessary to not own oil stocks or miners, or at least own them in minimal amounts. That’s one of the main reasons why it’s been possible for fund managers to be sitting towards the bottom of the performance league tables and yet still beat the market in recent years.
‘The market trades on a valuation more or less in line with historical averages, so neither looks dangerously expensive nor attractively cheap. However, digging a little deeper reveals significant differences in valuations between companies and categories,’ he said.
‘As we enter 2016, I think investors would do well to ensure that their portfolios do not rely on recent trends continuing indefinitely. If there is one lesson the stock market teaches us over and again, it is we must be prepared for change.’
Over the next few slides, we feature the views of fund managers on how they see the major global stock markets performing next year.
Next: Dividend danger in the UK
More about this:
Look up the funds
- Fidelity Special Situations A Acc
- Invesco Perpetual Income Inc
- Invesco Perpetual High Income Inc
- Neptune US Opportunities A Acc GBP
- Jupiter European Special Situations Acc
- Schroder European Alpha Inc A Acc
- Schroder European Alpha Plus Acc
- Jupiter Global Emerging Markets Inst Acc
- Fidelity Emerging Markets Acc
Look up the shares
Look up the investment trusts
Look up the fund managers
- Alex Wright
- Richard Marwood
- Mark Barnett
- Felix Wintle
- Nick Peters
- Cedric de Fonclare
- James Sym
- Ross Teverson
- Nick Price
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