2019 started with declines in the major equities markets and continuing volatility. I expect this will be the theme for 2019 and the economic and political outlook to be difficult on a global basis, with the major economic areas of North America, China and Europe all facing different headwinds, and central institutions having limited capacity to act - interest rates at low levels, and government borrowings at high levels. One thing that is certain for 2019 - continuing uncertainty.
Closer to home, there is the challenge of Brexit. We don't know precisely how this will play out, with the worst outcome likely to be even more continuing uncertainty.
Nonetheless, against this backdrop, we must still consider our own individual investment portfolios - whether we are starting out on our investment journeys, or at the other end of the scale, funding our retirement.
Here are the top 5 investment ideas that I will be considering for my own investment portfolio in 2019.
Traditionally I've kept most of my holdings in GBP. I've had some exposure to USD through various public equities; but this wasn't a primary driver of those investment allocations.
In 2019, I will look to add some major currencies to my holdings - likely USD, CAD, JPY and AUD - as a hedge against any short term movements to GBP. I'm short on the prospects for Europe (and EUR) - credit and fiscal challenges with Italy, weak car demand likely to impact Germany, poor PMI data for France, and a potential trade war with the US - all provide reasons to be cautious.
I will look to add currency exposure where possible through international stock picks (see below), rather than holding too much cash, due to the negative impact of inflation.
2. Commercial property: warehouses and offices
Property in the UK has been a long-standing attractive asset class. Residential property in some segments in London started to decline in 2018, and I expect this to ripple out to the UK regions in 2019. Regardless of the Brexit outcome.
I think Commercial property offers a potentially more resilient option. I'm not a fan of UK high street though, given internet trends to shopping online. Therefore, I will be looking to allocate to commercial property funds with a focus on Offices - which have long-term consistent trends - and Warehousing - one positive impact of Brexit is stockpiling by corporates to ensure stability in the supply chains to mitigate the impact of trading uncertainty.
This is a new exposure for me, so I will look to average-in to these funds, by buying a small amount each quarter in 2019.
3. Property lending
Perhaps unsurprisingly I will continue to keep an investment allocation to loans secured against UK property. A diversified loan portfolio secured against conservative property developing - smaller projects, with lower LTVs - can produce a steady and well protected return.
I will add to my investment allocation through BondMason, which has achieved 6% p.a. net of fees in each of the last three years.
4. Stock pick; and don't blindly allocate to the biggest index trackers
Most of my public equity exposure has traditionally been through individual stocks rather than trackers. I continue to have concerns about long term trends for trackers - the increase in popularity of robo-advice and passive investing seems to drive the demand in trackers. Giving rise to concerns that stocks included in the most common trackers (e.g. FTSE 100) may be overvalued as a result.
I plan to continue to stay away from trackers, and maintain a small portfolio of 20-40 stocks.
Clearly this takes time, and brings with it transaction costs. So if this is difficult for you, then you may want to look at less popular trackers such at FTSE 250 or FTSE All Share.
5. Optimise tax structuring
I will look to add more to my SIPP during 2019, benefitting from tax contributions. Hopefully this will help to ease the pain of what I foresee as a difficult investment horizon. ISAs can offer a good tax shield against return; and if you are later in life, you may like to investigate IHT products.
Tax shouldn't lead your investment decisions, but can assist to optimise returns.
What I won't be doing
I will not be adding corporate bonds or gold. I feel that the yields on corporate bonds leave very little room for upside. I don't subscribe to gold being an effective hedge - it is volatile and price movements over the last 5 years do not demonstrate a clear negative beta to the main equity markets - so I'm not willing to add it to my portfolio.
Whatever you decide to do in 2019, good luck with your investing, remember to keep your investment portfolio diversified; and be careful out there!
- Stephen Findlay, January 2019
The thoughts in this article are my own, and do not constitute investment advice. If you are in doubt, speak to your financial adviser.