How investors can benefit from the market sell-off – and three funds to help

18th January 2016

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2016 has already been a shocker for investors with markets tumbling worldwide and now the bears are out in force.

The list of concerns has been building up causing markets to fall now investors are more focused on the short term and reluctant to invest until they can see an improvement in the markets.

The backdrop has been so negative that the FTSE 100 is now down by 18% from its April 2015 peak.

However Adrian Lowcock, head of investing at AXA Wealth believes investors should look beyond the short term volatility.

He said: “By focusing on their goals, such as saving for retirement, they can make investment decisions based on the longer term and ignore the noise.

“Whilst trying to buy back in before markets recover, when confidence is low, is likely to prove even more difficult. Trying to time markets can be damaging to your wealth, it is better to focus on topping up investments at lower prices.”

Lowcock asserted that investors must “think longer term”.

While most professional investors are looking very short term at present as they wait for some direction. Individual investors do not have to report short term performance and can afford to invest for the longer term.

“Think about when you need the money and why you are investing,” added Lowcock.

“Consider adding to your investments – It is difficult to convince yourself to top up your investments at a time when others are being fearful, but investing in the FTSE 100 at 5,800 points is more attractive than at 7,100 and over the long term will reward you.”

But savvy investors should drip feed cash into the market as it is naturally difficult to predict where markets will go in the short term and where the bottom of any sell off is until after the event.

Lowcock said: “Drip feeding allows investors to add to their portfolio should markets fall further.”

Below, he tips three funds to which could help investors benefit from the sell-off in the long run.

Blackrock Continental European

Europe continues to look attractively valued compared to other developed markets. Manager Vincent Devlin doesn’t chase short-term market fluctuations, instead he looks for companies with long term earnings power higher than that in the market and isn’t fully reflected in the share price. The fund tends to be focused on mid and large companies and because of his strong conviction he can have periods of underperformance in the short term.

GLG Japan CoreAlpha

Japan also looks attractively valued and we are now starting to see the positive effects of changes in policy.  Manager, Stephen Harker looks for opportunities which are out of favour with the markets and performing poorly, waiting until they recover before selling.  He tends to focus on large companies and his contrarian approach means he will have periods where the fund lags the market.

JP Morgan Emerging Markets Income

Emerging Markets are currently out of favour and remain volatile. But for long term investors willing to drip feed money in, valuations are attractive.  Richard Titherington has a flexible approach and is able to invest in defensive stocks and cyclical companies to benefit from changes in outlook for the region.

 

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