What is your investment strategy for 2018?

Since the financial crisis of 2007/8 stock markets around the world have been extremely difficult to predict with any great confidence. While many believe that the US stock market is enjoying a bull run with more to follow, others are concerned about the ever-growing valuation of technology-based companies. Historically a quick glimpse over your share portfolio at the end of the year and a few tweaks would be enough to reposition your assets for the next year. However, things have changed dramatically in recent times and your investment strategy for 2018 might need to be very different to what you have been used to!

Standing still is dangerous – not a good investment strategy

Historically we know that long-term investors make the greatest returns, sticking to solid investment strategies and staying with companies through thick and thin – if the long-term growth story remains intact. This strategy will always offer a backbone to those with a long-term investment horizon but for those looking to bank short to medium term profits, standing still can be dangerous. The year-end is traditionally a time of reflection, comparisons and setting new targets for the next year.

What is your investment strategy for 2018?
What is your investment strategy for 2018?

Technology shares

In reality technology shares have been the sector of the century so far with some astronomical increases in share prices. We see the likes of Apple with a multibillion-dollar warchest, we see Amazon forecast to grab more than 50% of the future online retail market and then we have the likes of Google dominating the search engine sector and looking to spread its tentacles far and wide. While these companies are trading on what some would deem “heady” valuations they look “cheap” in comparison to some of the loss-making technology companies of today!

The problem with some technology companies is that it is always jam tomorrow, the good times will roll in the future and in the meantime it is just a case of investing and expanding. Markets and investors will buy into these stories and strategies but only for a certain length of time. Are we coming towards the end of that period for some companies such as Snapchat? Will investors and markets demand at least a glimmer of profitability in the future?

Traditional industries – time for an old investment strategy?

While the retail and banking sectors have been hit hard by competition brought about by the Internet, many believe there is growing value in the sectors. Slowly but surely some of the larger banks and retail companies have adjusted to the online market, have exploited their brands and defended themselves very admirably in some cases. A number of banking shares have underperformed markets in recent times but offer something which the vast majority of technology companies can’t, dividend income.

It is difficult to say with any confidence whether dividend income will become more important in the minds of investors over the next 12 months, but how far can markets really rally from this level? Donald Trump is still alienating supporters in the US and overseas, his economic policy is muddle to say the least and there are serious concerns that he will not be able to see out his full presidential term. That said, the performance of the US stock market and economy has surprise many over the last 12 months in spite of Donald Trump’s efforts.

Finally, Donald Trump

So, if Donald Trump does manage to get his act together, offer greater protection to US businesses, balance tax rates and tax take by the authorities and encourage investment in areas such as real estate, maybe the markets could go higher over the next 12 months? That said, it is difficult to see a repeat of the phenomenal rises we have seen in technology shares in recent times. Maybe it is time to take a breather with technology shares, let trading and profitability catch up with valuations and perhaps look towards more traditional, grounded and income producing investments such as retail and banking?

Maybe, just maybe, the recent troubles surrounding Apple and allegations that older iPhones were “intentionally slowed down” might be a reminder that the technology sector is not the Teflon kid it used to be? Is it time to change your focus and your investment strategy?

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