Should I be investing elsewhere?
I currently invest £100 per month in an Isa with Fidelity Split European Special Situations and its South East Asia fund . Are my investments wise or could I be doing better? Ian, Hexham
Jason Witcombe, chartered financial planner at Evolve Financial Planning replies: It all depends on your attitude to risk and your timescale for these investments.
Both of these funds are equity funds (as opposed to other asset classes such as property, fixed interest or cash) and both would be considered as 'adventurous' in most people's eyes. If your timescale for the investment is a couple of years then the funds you are in are probably not appropriate.
If you have a long time horizon and want to take an adventurous approach to risk and return, I would still argue that you should diversify across all world markets rather than just investing in Asia and Europe. Also, research shows that adding an element of fixed interest exposure can reduce volatility considerably but with only a relatively small effect on long-term performance.
Finally, you should be aware that both of the funds you are investing in are actively managed funds. You will be paying an initial charge (probably in excess of 5%) and an annual management charge (probably in excess of 1.5% per annum). If you were to switch to an index tracking strategy, you could find funds with zero initial charges and annual management charges of well below 1% per annum. Charges can make a really big difference to performance.
In conclusion, I would argue that a geographical spread of investments would be better than taking a bet on two specific areas (Europe and SE Asia) and that introducing an element of fixed interest to the portfolio could be worthwhile. Reducing costs through an index tracking strategy could also be of long-term benefit.
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