One of the things I enjoy about this time of year is the newspaper and magazine industry's collective look into all things past, present and future. I am sure this year will be no different with the reviews of the last twelve months' events, trends and major news items followed by crystal ball gazing at the prospects for 2010.
This desire to forecast the future is no less true of the financial services industry where column writers regularly ask their favourite investment managers for their Mystic Meg predictions for 2010. But as you read about the 2010 runners and riders, give a thought to last year's predictions.
Drag out the Crystal Balls
Looking at The Times experts' top 10 investment picks for 2009, spare a thought for the poor soul who said "It takes a brave investor to put money into stock and shares after the carnage that has taken place in 2008". I wonder if he is still thinking it was a brave move now that the FTSE All Share Index has gained 33.76% in the intervening period.
Fortunately The Times journalist was not alone as the following predictions show:
Darius McDermott of Chelsea Financial Services predicted that commodities were oversold and due for a bounce when he chose the Marlborough Commodity ETF chosen: "This fund is a bet on the spot price of commodities, they have fallen heavily in recent months, and I believe they are oversold and due for a bounce back." Clearly the bounce didn't happen as the fund recorded a return of just 11.32% in the period.
Still not to be outdone, Tim Cockerill of Rowan & Co recommended the Cazenove UK Absolute Target Fund said: "It is run by the very experienced Tim Russell," and "His investment process, based on the business cycle, looks absolutely spot on for today's times.". With a return over the last twelve months of 1.82%, Mr Russell missed the boat, and the fund now languishes 30% behind the FTSE All-Share, a fact that will weight heavily with the investors' £382million of money in the fund.
In fact, when you look at the recommendations of these Top Ten Experts as chosen by The Times, what you find is that only two of the funds managed to outperform the FTSE All Share Index during 2009, with one fund producing a return only 0.78% higher than the index. The other fund, the F&C Commercial Property produced an 8.91% greater return.
The Times Experts Top 10 Investments Picks for 2009
Not surprisingly, since it would be a short article if all the predictions were the same, there was little if any consensus of the types of funds that would produce better results. Probably more informative was the fact that the experts' predictions were fooled by events. Perhaps making predictions on the direction of markets and the ability of investment fund managers is more difficult than even the experts foresaw.
Still, here are some predictions that we think will work in 2010:
· Investment predictions in 2010 will be no more reliable than those in 2009;
· Most of the time, most investment managers will fail to beat their benchmark index;
· We will 'stick to our knitting' and continue to diversify your investments; we will not make predictions on the future direction of markets, stocks or managers.
