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Money: Br£xit-proof your finances

WE ARE always told to invest our money for the long term, but in the midst of a political crisis this can be hard advice to take. That’s particularly true at present, with the soap opera at the House of Commons still showing no sign of reaching a conclusion.

Given the uncertainty that the British economy faces, it is tempting for all of us to forget investing in stocks and shares and put our money in cash. Research shows that is just what many of us are doing, with a study from share trading platform Selftrade showing that a quarter of investors have put more money into cash, and 15 per cent have put less into the stock market in the past six months. Experts say that this may seem the right call when we use our gut feeling, but with interest rates at historic lows, nest eggs parked in cash are actually losing value every year.

‘The post-Brexit world of political and economic turbulence is not going to be easy to navigate,’ says Thera Prins, Selftrade chief executive. ‘During times of uncertainty, people tend to sell-up or freeze and do nothing out of fear of making the wrong decision, but taking a look at the markets and investing carefully is a much better option than leaving money to depreciate in cash.’

Laith Khalaf, senior analyst from investing platform Hargreaves Lansdown, adds that global uncertainty might be signalling this is the right time to invest. ‘It’s rare to find a period when everything seems to be going swimmingly, and actually when it does, that’s usually a warning sign rather than a green light. History tells us it’s often rewarding to invest when it’s uncomfortable to do so.’

But if you’re bamboozled by the mechanics of Brexit, where can you invest that has little to do with the current machinations in the House of Commons?

Here are a few suggestions that could spice up your portfolio, though, of course, always remember investments can go down as well as up. Many of them are pooled funds, where your money is shared between a number of companies picked by an expert fund manager. These can be bought on many online fund-dealing platforms and held in a pension or ISA. Try comparefundplatforms.com to find one that might suit you.

Artificial Intelligence

If you’ve got a Google Home or Amazon Echo in your house, or you are excited by the concept of self-driving cars, you might want to take a look at investments in the burgeoning field of artificial intelligence.

Chris Ford, fund manager at Smith & Williamson’s Artificial Intelligence, is the only expert who puts together a fund based on this theme. He believes that even though most of the companies he is invested in are domiciled overseas, this is still an investment that exposes you to the best things about British technology.

‘Google is the leader in AI, and they’ve gained that position from buying a UK company — Deepmind,’ he explains. As well as Alphabet, Google’s holding company, the company’s investments also include Ocado — a UK company that is increasingly exporting its technology abroad, announcing a deal with Australian group Coles earlier this year.

‘People always think Ocado is a supermarket, but it’s really not. What it is, is a solution for anyone who wants to start offering online shopping in any country,’ Chris says. ‘They could spend a lot of time working it all out for themselves, or they could just buy it from the experts.’ The Smith & Williamson fund is the only one investing specifically in this area, and it is up 22 per cent in the last year.

Japan

‘In many ways what is happening in Japan is the opposite of Brexit,’ says Karen See, fund manager at Baillie Gifford Japanese Income Growth. ‘Where everyone else is trying to tighten up on immigration, Japan is softening, a little, to deal with the demands of its ageing population.’

She adds that Japanese companies are moving in line with international standards in business, appointing non-executive directors and allowing far more scrutiny than before. She sees this as a positive step that should push up Japanese shares.

Timely: Why not invest in Japanese shares

Alex Lee, portfolio manager at investment group Columbia Threadneedle, says that many investors are missing a trick when it comes to Japan. ‘Global investors underappreciate the changing behaviour of Japanese companies, which has made them more resilient,’ he says. He adds that Japanese profitability is at an all-time high.

There are many funds that invest in Japan, with some having a more specialist focus on shares that pay a regular income, or on smaller or larger companies. Recent analysis by Willis Owen shows that the Legg Mason Japan Equity Fund is one of the best performers over the past five years, up 135 per cent in that time. Darius McDermott, at Chelsea Financial Services, recommends the Baillie Gifford Japanese Smaller Companies fund.

‘This fund invests in the higher-risk area of Japanese small-caps, with the manager looking for innovative firms that have the potential to be future industry leaders,’ he says.

Global healthcare

It can’t be denied that we are all getting older. And the older we get, the more healthcare spending will be needed just to keep us on our feet.

James Douglas, fund manager of the Polar Capital Healthcare Trust, is excited by gene therapy — a way of using genes to treat illnesses — and immuno oncology, which stimulates a patient’s immune system to treat tumours.

His trust invests in large healthcare companies, with a US focus, and some of its larger holdings include Johnson & Johnson, Merck, Novartis and Abbott Laboratories.

A recent survey from investment media group Master Investor found that healthcare is the top most popular sector for UK investors at present. Shares in the Polar Capital Trust are traded on the stock exchange. They are up 43 per cent in the past five years, and 16 per cent in the last year.

Brazil and Latin America

Many investors are scared by the label ‘emerging markets’, which is used to cover everything from Mexico to India to Vietnam. It is true that these markets are more volatile than markets such as the US and UK, but as current events show, the developed world is not immune to seismic political happenings, either.

If you are brave though, there is excitement to be had in investing in other parts of the globe, where there are fewer issues with an ageing population and many economies are growing very fast indeed.

Fund managers who know their areas try to pick and choose the best.

Devan Kaloo runs Aberdeen Latin American Equity, and has the bulk of his holdings in Brazil and Mexico.

He says that although the policies of the new Brazilian President, Jair Bolsonaro, are ‘socially regressive’ he is very liberal economically.

Investments include a Brazilian bank and car hire firm, a chain of Mexican supermarkets and the owners of Cancun Airport. The fund is down 2.3 per cent this year, but up 52.6 per cent over three years and 27 per cent over five.

Elsewhere in emerging markets, Sarah Coles, personal finance analyst from Hargreaves Lansdown, recommends the JPM Emerging Markets fund.

‘They have holdings in everything from Chinese online giants Tencent and Alibaba to Indian financial conglomerate HDFC, and MercadoLibre, Latin America’s most popular online shopping site,’ she says. The fund is up 3.7 per cent over one year, 61 per cent over three years and 64.5 per cent over five years.

Stay put

Finally, if none of these alternatives appeal, you could always just hold your nose and stay in the UK market.

‘While Brexit will have a short term impact on UK stocks, for better or worse, the market looks decent value on a long term view, and comes with a pretty healthy yield to boot,’ says Laith.

A FTSE 100 tracker fund, such as the low-cost alternative offered by Vanguard, may yet see you through the Brexit blues.