Adrian Garside

I’ve just been reading an article by Roger Nightingale, a well known and well respected economist.

The article is pretty downbeat – on growth he says “At no stage, and in no country, has it been self sustaining” and he’s including the US, Europe and China in that analysis. He also predicts that the cycle is due to turn down in late 2011 whatever has happened before then.

So, what’s the good news?

Well, I’m taking 2 things from this. *

For borrowers: He predicts interest rates to remain low for a bit longer – which explains the trend for mortgage fixed rates to become a bit cheaper over the past month or two. Actually, fixed rates are getting so low that it may be a good time to switch over to one for some people.

For investers: Stocks and Shares should suffer in this environment, but that gives investers a chance to buy up stocks and shares cheaply and profit when the recovery (becuase there will be one, one day) happens. Mind you, it can be a little disappointing when you analyse the growth in your portfolio during this period, you have to hold your nerve.

* When I typed that initially I had 3 things, but I’m blowed if I can remember the 3rd now. I’ll post it later if it comes back to me!

For people looking for a stocks and shares ISA there are plenty of options – I’d guess there are in excess of 3000 ‘funds’ you could choose from.

And, it’s not too hard to select a fund that looks like it has performed well in the past either.

But choosing a single fund has it’s dangers. For instance, it may just ‘go off the boil’, or maybe the talented fund manager gets poached and the new guy is a bit rubbish, or, is it nicer to say the new guy takes some time to find his feet. And of course, we know that ‘having your eggs in one basket’ is bad where investments are concerned.

I’m writing this post because this week there have been a number of fund managers defecting from one firm to another, and the funds that are ‘headless’ may be facing more uncertainty than is ideal. The new fund is, of course, triumphant, and heralds the fresh start with lots of press releases and so I will often get a sober report of a departure in the morning and in the afternoon a slightly more buzzing headline, such as I have just recieved “Jupiter poaches Kathryn Langridge” – she used to be a star “AAA rated” manager with Invesco Perpetual and naturally, Jupiter are delighted.

The trouble with your ISA is that you are only allowed 1 per year – so if you like Kathryn, or more likely, her impressive results, you can’t follow her with your investments until next April.

Wouldn’t it be good if there was a more flexible strategy? Well, there is.

You see, you can take your ISA with a software provider who has access to a great number of funds – say 1000.

You can then choose to split your investment amongst different funds, maybe 8 or 10 (or however many you want) , to spread your risk around and then you can review those selections periodically and change them if you wish.

These systems are called ‘platforms’, there are a number available and each has different strengths and weaknesses – some are only accessible via an IFA. An IFA can help you select a platform, and the the IFA can also help you select funds that suit your attitude towards investment risk and make sure there is sufficient diversity.

Diversity can help reduce risk.

Being able to switch your funds around means that if one or two of the funds you use are performing below par, you can switch out of them.