Has Covid Resulted In More Investment Opportunities?

We have never seen an event like the COVID-19 pandemic before in our time. For better or for worse, it has completely changed every single person’s life.


Has Covid Resulted In More Investment Opportunities?

For businesses, many have felt the negative effects of a global lockdown. Industries like hospitality, entertainment and travel have all had a very difficult time over the last 12 months, which has led to some hard times for many people. 

My heart goes out to anyone who has lost friends, family and livelihoods during this unprecedented time. 

For those who have kept working, most people have had to adapt to a completely different work practice that has affected their jobs, their businesses and the economy as a whole.

Some companies have flourished

However, despite mass redundancies and global recessions, some firms have flourished during the outbreak of COVID-19.

Organisations like Pfizer and AstraZeneca that have produced vaccines have done extremely well, as have online businesses, such as Netflix, Google, Amazon, Apple, and online retailers like Boohoo and ASOS.

These companies have done better than ever!

The light at the end of the tunnel

So, even though the UK economy has been through its worst period for 300 years, there is light at the end of this tunnel, particularly when talking about investments.

The mass rollout of the COVID-19 vaccines in places like the USA, UK and Israel means that, hopefully, we should start seeing the rest of the world follow suit, and things may start to stabilise once again – something that every fund manager is hoping for.  

However, even in the turbulence and volatility that COVID-19 caused, or perhaps because of it, there are some great investment opportunities to be had potentially. 

The importance of diversification 

For example, the national lockdowns caused by COVID-19 created a lot of opportunities for investment in technology stock, particularly those technology companies in the US. 

The rapid growth of these US companies, like Zoom, Netflix and Tesla, show us how important it is to have a well-built and thoroughly diversified investment portfolio. 

All of our clients have diversification not only across asset classes, but also across different funds in different geographical regions.

Interestingly, the more aggressive, riskier portfolios we’ve managed, which are 100% equity risk, have actually outperformed all the others. 

Opportunities in overseas markets 

This is particularly true in portfolios that have most of their equity in overseas markets. The more money they’ve invested abroad, in markets like the US, Japanese and European markets, the better their return has been. In fact, these portfolios have actually made a positive return compared to January 2020.

So, many of our clients have made money, even though the UK stock market is the poorest performing stock market of the major economies around the world!

Thanks to the performance of the big tech companies, amongst other things, the markets in the US have gone through the roof.

In addition, the Japanese stock market has practically doubled! 

The growth of these foreign markets provides lots of opportunities for the people who have not just been stuck with only buying UK investments, to make some good returns, whilst the UK market recovers its losses.

The UK market is good value 

However, we are getting to the point now where the UK market is starting to offer some potential opportunities for investors too. We are starting to take some of the profits that we’ve seen in overseas funds and bring them back to the UK.

Why? Because the UK market is looking cheap compared to its counterparts. If you want to invest in a market that has doubled in a year, like the Japanese market has, that’s going to be quite expensive to buy into compared to where it was back in January 2020. 

So, although the UK market has underperformed over the last 12 months, there are opportunities to make some potential gains there when the market eventually fully recovers, which looks like it may happen soon. 

This is why we are starting to move some funds from overseas and reinvest them in the UK market, whilst still leaving some funds in the high performing overseas markets for diversification.

The importance of an independent financial adviser

To fully take advantage of these investment opportunities and diversify your portfolio, it’s vital that you use a well-established and experienced fund manager who knows the market overseas very well.

Buying overseas direct shares or equities is quite difficult and expensive. Doing it yourself runs a much higher risk than giving your money to a fund manager in that particular market.

Getting the best out of the fund managers

At Applewood Independent Ltd, we are active investors for our clients. This means that we don’t use funds that just track a particular index or particular stock market, but we are looking for active fund managers who have got a track record of beating market returns over the medium and long term. 

This means we have a detailed understanding of the entire market and the opportunities that are out there. We not only look at the individual markets to decide on the right fund manager, but we can also monitor that fund manager and their performance over time.

If they have off periods where they are underperforming, we know. We are keeping an eye on it every day, and reviewing every fund that we invest in for a client every three months and comparing the performance to their peers.

An experienced independent financial adviser, who has lots of knowledge and years of working with fund managers, should be the first port of call rather than anybody attempting to try to do this alone. An amateur trying to make investments like this, particularly for large sums, will usually end up making some terrible mistakes and hurting the value of their investment. 

 

I hope this has been useful, and if you have anything else to add, I’d love to hear from you. To find out more, feel free to get in touch by emailing david@applewoodindependent.co.uk.

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.


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