Volatility doesn’t mean you should sit on your hands when it comes to investing
Thursday 09 Jan 2020 Author: Daniel Coatsworth

The New Year has been fairly testing for investors after an initial bout of joy. The first few days were rewarding on the markets until everyone’s attention turned to tensions between the US and the Iran, putting stocks into reverse.

Investors were braced for more pulling and shoving between the US and China and their trade war, yet it is fair to say that a deterioration of Middle East risks wasn’t among the widespread predictions for the 2020 agenda.

It is a reminder how political issues can have a major influence on asset prices and that investing is often about holding your nerve and staying focused on the long-term value generation potential of your portfolio and not panicking at whatever twists and turns the market takes.

Despite this turbulent start to 2020, all is not lost for anyone owning shares and funds. A well-diversified portfolio should ensure that some of your investments are still maintaining or growing their value even on the darkest days of the market.

There are still plenty of opportunities despite a backdrop of geopolitical tension. For example, this article looks at ways to invest in megatrends such as resource scarcity and an ageing population. These trends will still be intact regardless of economic activity and geopolitical tensions and so present investors with a variety of portfolio options.

You can also read about plans for a new farmland-themed investment trust amid rising demand for assets uncorrelated to the market.

Furthermore, we note comments by investment bank Morgan Stanley that UK stocks still look cheap compared to other parts of the global market even after enjoying a rally following the general election result in December.

For those still seeking ways to play the ‘Boris bounce’, why not look at the UK-focused investment trust laggards which are still trading on large discounts to their net asset value despite the rally in the domestic market.

This could be good hunting ground for opportunities that the broader market has missed – albeit double check why they are trading on discounts.

For example, Artemis Alpha Trust (ATS) is still trading on a 15.8% discount despite its share price having moved higher since the election. This is potentially explained by its portfolio containing growth rather than value stocks; the latter have been more in demand in recent months.

Other UK names still trading on wide discounts include Henderson Opportunities Trust (HOT) on a 15.4% discount and Keystone (KIT) on 12.7% below NAV.

In contrast, many trusts have seen their discounts narrow considerably since the election result; some have even switched to trading at a premium to NAV such as Temple Bar (TMPL) which is now trading at a 0.3% premium versus a 12-month average discount to NAV of 3.1%.

Should you explore this part of the market, just remember that we’ve got Brexit around the corner which could make share prices a bit choppy.

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