View the article online at http://citywire.co.uk/money/article/a652322
Diary of a Dumb Investor: Japan's dangerous siren call
Call me a wuss, but I just wouldn't bother with investing in Japan or mainland China.
Plug your ears with beeswax; have yourself tied to the mast! The old advice about withstanding the call of the Sirens holds true today, although this is not the sweet song of mythical murderous temptresses, but the annual whirr of the Japanese stock market.
I won’t be lured in. Why, I’m curious to know, would anyone invest in Japan?
By that, I mean the average UK investor. Every year the Japanese stock market seems to go through a false start, accompanied by bullish statements from market commentators, only for the rally to fizzle out.
Stocks just don’t seem to be able to rise consistently from under the weight of bad politics, yen strength and floppy economics.
In the past five years, funds invested in Japan have on average risen by 1.8%, according to Citywire data. The three funds swerving the country to invest in small and medium-sized companies in the region are the ones topping the global tables (see Asia Pacific Small & Medium Companies sector.
Does the return of Shinzo Abe as PM – after a ‘disastrous’ first term – and some aggressive stimulus (with unpredictable results) change that? We've yet to see.
Perhaps it is exactly that kind of scepticism that leads investors like me to miss out on the biggest gains, the juiciest goodies. And maybe I’d feel differently if I didn’t have so little money to spread around.
But I would apply the same thinking to China too. Specifically mainland China shares. Here too funds – the means by which I would invest were I that way inclined – have not done well. In fact, over five years mainland China funds are down 7%. Greater China funds, which allow the fund manager to put their money in places like Hong Kong where companies are better managed and the stock market less influenced by volatile local investors, have gained by nearly 11%.
I would trust in the fund managers like Hugh Young who are wary of mainland shares. But like Japan, a punt on mainland China just doesn’t seem to be worth the risk.
Maybe that’s why I’m not a great investor yet. I lack the gumbo to invest in long-falling markets.
I’m obviously not saying I’ll only invest in markets that have risen a lot – I took a punt on a short-term plummet in Standard Chartered (STAN.L) shares after all – just that there seem to be some no-go zones even for an investor with a relatively high risk threshold. That, at least, is what I think I am.
So once again, I find myself wrapping up with a familiar question: am I missing the point?
My portfolio: Click to enlarge
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by Gavin Lumsden on Apr 16, 2014 at 15:17