Deciding where in the world to invest your hard-earned money is often easier said than done. How do you choose between different regions and sectors and how do you decide how much to allocate to each? Well, what if you didn’t have to? Few of us can say with any certainty which economies will deliver the best returns over time. Different economies perform well at different times, as particular themes emerge, and only a truly global portfolio can capture these.
This is the key advantage that global fund managers have over their regional-specific peers – they can cherry-pick the best income or grow opportunities across the world, rather than being constrained to one particular market.
Despite the many attractions of investing globally, some still favour investing in their home markets, shying away from investing in overseas markets in the belief that it is too risky and/or complicated.
But it’s worth remembering that you have plenty of exposure to your home economy already – you work here, earn your wages here and you may also own a property here. That’s substantial exposure already. Diversification is the foundation of any successful investment portfolio and when it comes to choosing investments for your ISA, the rules of spreading your risk still apply.
Remember that old story about eggs and baskets? Well, a global equity fund can do this for you.
If you’re wondering about the merits of this approach, have a look at the Fidelity Global Special Situations Fund, managed by Jeremy Podger. Podger is a veteran when it comes to global investing and uses a robust framework to invest.
When he’s deciding on what companies to hold within the fund he looks at three key factors: corporate change, exceptional value and unique business. Any holding going into the fund needs to tick one of these boxes. Consequently, he ends up with a good mix of investments across the world. Of course, diversification is not just about holding a spread of investments across different regions - sector diversification is equally important with the fund also holding a good spread across different sectors.
The final area of diversification which this global fund offers is a good mix between so-called ‘growth’ stocks (companies with high expected profit growth, regardless of valuation) and ‘value’ stocks (cheaply rated, regardless of expected earnings growth). Fidelity Global Special Situations Fund’s unique investment framework means this fund benefits from stylistic flexibility. This has enabled the fund to deliver solid performance, not just when ‘growth’ opportunities appealed most but also when value stocks rebounded strongly.
If you’re an investor looking to unlock a regular income from your ISA investments, while equally spreading your investments across overseas markets, it might be worth looking at the Fidelity Global Dividend Fund, managed by Dan Roberts. This fund searches the world for companies that have the potential to pay consistent and increasing dividends.
When it comes to investing for income, many investors still prefer the UK, where the history and culture of companies paying shareholder dividends is deeply entrenched. But income paying companies in the UK are highly concentrated – with just 15 stocks accounting for more than 80% of dividends paid1. Perhaps it’s time to cast your net a little bit wider? Adopting a global approach to ISA investing can help.
1 FT Adviser - 14 September 2017 https://www.ftadviser.com/equities/2017/09/14/data-reveals-income-funds-concentration-patterns/
The value of investments and the income from them can go down as well as up, so you may not get back what you invest. When investing in overseas markets, changes in currency exchange rates may affect the value of your investment. Tax treatment depends on individual circumstances, and all tax rules may change in the future. You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals. These funds use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.