Trump’s return to the White House sparked a stock market rally last week, led by the promise of the $500bn artificial intelligence (AI) investment, Stargate.
US stocks soared off the back of the news, along with solid earnings from some market leaders, reaching a new record closing high.
However, this week markets have been given a reality check after NVIDIA lost its crown as the world’s biggest company – its share price fell significantly following the emergence of a new Chinese competitor, DeepSeek.
We’ll have to wait for the dust to settle to see if the sell-off was justified, or perhaps just an overreaction. But if the last couple of days have taught us anything, it’s that markets can be volatile, particularly in the short term, reminding us just how important it is to diversify your portfolio.
Here are three fund ideas that could help.
This article isn’t personal advice. Remember, investments and any income from them can rise and fall in value, so you could get back less than you invest. Yields are variable and past performance isn’t a guide to the future. If you’re not sure if an investment’s right for you, ask for financial advice.
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, use the links to their factsheets and key investor information.
Europe – Polar Capital European ex UK Income
Compared to the expensive US stock market, Europe looks relatively cheap to us right now. This means company shares typically look good value compared with their future earnings potential, although shareholder returns are not guaranteed.
The growth potential in Europe, a fairly mature market, isn’t as high as some other areas, and there are also some macroeconomic headwinds that could hold the region back.
However, the stock market is pricing in a lot of negativity, and we believe this leaves room for some longer-term positive surprises.
Polar Capital European ex UK Income offers an income and takes a relatively conservative investment approach. This makes it different to a lot of other funds focused on high-growth areas that can make them more volatile.
The managers invest in large European companies they think are undervalued. These are companies going through a tough time, or where the manager doesn’t feel the share price matches the company’s longer-term potential and could bounce back.
As a concentrated fund, each investment could have a big impact on performance, which increases risk. The managers also have the flexibility to use derivatives which can magnify any gains or losses and increases risk.
Nick Davis, the fund’s lead manager, currently focuses on sectors like insurance, telecoms and transportation. These are defensive areas that pay an attractive income – the idea behind this is these companies have tended to hold up well regardless of how the wider economy was doing.
The fund has a historical yield of 4.43%.
The fund takes charges from capital which can increase the yield, but reduce potential for capital growth.
Investors should note that, as of 31/10/2024, this fund invests 17.67% in companies involved with the extraction of oil, gas or coal. This could leave the fund vulnerable to fluctuations in commodity prices, regulatory changes aimed at reducing carbon emissions, and potential shifts in consumer preferences towards sustainable alternatives.
31/12/2019 To 31/12/2020 | 31/12/2020 To 31/12/2021 | 31/12/2021 To 31/12/2022 | 31/12/2022 To 31/12/2023 | 31/12/2023 To 31/12/2024 | |
|---|---|---|---|---|---|
Polar Capital European Ex UK Income | -5.89 | 11.45 | 7.29 | 10.47 | -0.81 |
MSCI Europe ex UK | 8.2 | 17.59 | -6.86 | 15.77 | 2.77 |
Total Return – Troy Trojan
If you’ve got a lot of exposure to shares in your portfolio and would prefer a lower-risk option that offers diversification, then you could take a look at the Troy Trojan fund.
The managers of the fund, Sebastian Lyon and Charlotte Yonge, like to keep things simple. They aim to shelter investors' wealth just as much as grow it.
Rather than trying to shoot the lights out, the fund aims to grow investors’ money steadily over the long run, while limiting losses when markets fall. It tries to experience smaller ups and downs than the broader global stock market, or a portfolio that's mainly invested in shares.
The fund is focused around four 'pillars'.
The first contains large, established companies Lyon and Yonge think can grow sustainably over the long run and endure tough economic conditions.
The second pillar is made from bonds, including US index-linked bonds, which could shelter investors if inflation rises. Some of the fund is also invested in traditional UK government bonds (gilts).
The third pillar consists of gold-related investments, including physical gold, which has often acted as a ‘safe haven’ during times of uncertainty.
The final pillar is ‘cash’. This provides important shelter when markets stumble, but also a chance to invest in other assets quickly when opportunities arise.
The managers have tended to focus on companies based in developed markets, like the US and UK. This includes some of the world's best-known companies with highly-recognisable brands.
The manager has the flexibility to invest in smaller companies, which, if used, adds risk. The fund is also concentrated which means each investment can contribute significantly to overall returns, but it can increase risk.
31/12/2019 To 31/12/2020 | 31/12/2020 To 31/12/2021 | 31/12/2021 To 31/12/2022 | 31/12/2022 To 31/12/2023 | 31/12/2023 To 31/12/2024 | |
|---|---|---|---|---|---|
Trojan Accumulation | 7.6 | 12.31 | -3.67 | 2.88 | 6.67 |
UK Retail Price Index | 1.2 | 7.55 | 13.44 | 5.16 | 3.46 |
FTSE All-Share | -9.82 | 18.32 | 0.34 | 7.92 | 9.47 |
Sustainable Corporate Bonds – Fidelity Sustainable MoneyBuilder Income
If you’d like to generate an income stream from your investments, you could consider the Fidelity Sustainable MoneyBuilder Income fund.
With interest rates still at elevated levels, high-quality corporate bonds look attractive. They’re currently paying a good yield. And while interest rates aren’t predicted to fall as fast as they once were, if they do go down then the price of these bonds should rise – remember though, there are no guarantees.
Over the longer term, the Fidelity Sustainable MoneyBuilder Income fund aims to give a relatively steady income and a small amount of growth, without taking big risks. It does this by buying bonds issued by companies deemed to be high quality.
As at the end of November, the fund was yielding 4.9%.
Managers Kristian Atkinson and Shamil Pankhania are supported by a highly regarded team of analysts. Time and time again, the team has shown its skills at analysing bond-issuing companies to find the most attractively priced bonds.
This fund can invest in derivatives and high-yield bonds, which adds risk.
31/12/2019 To 31/12/2020 | 31/12/2020 To 31/12/2021 | 31/12/2021 To 31/12/2022 | 31/12/2022 To 31/12/2023 | 31/12/2023 To 31/12/2024 | |
|---|---|---|---|---|---|
Fidelity Sustainable MoneyBuilder Income | 7.78 | -1.40 | -19.31 | 9.07 | 2.46 |
IA Sterling Corporate Bond | 7.75 | -1.90 | -16.39 | 9.22 | 2.71 |