The best funds to buy in 2007 – MoneyWeek

Bestfunds:buyintoEuropeandJapan

Amongdevelopedmarkets,continentalEuropelooksattractive,tradingon13timescompanyearningscomparedtoitshistoricallong-termaverageof14。

5。

WithalowerdebtburdenthantheUKandgrowthforecastalmosttodoubleto2。

5%thisyear,it’snosurprisethatthesectoristhemostpopularamongfundmanagers,asarecentMerrillLynchsurveyshows。

DariusMcDermottofChelseaFinancialServicesbacksJPMEuropeDynamicFund,whichgained29。

8%for2006,inTheSundayTimes。

DespiteadisappointingyearinJapan,expertsremainbullishonitslong-termprospects。

Witharobustbankingsector,andbothGDPandwagesontherise,TimCockerillofRowanCotellsWhatInvestmentthatheremainskeen。

BrianDennehyatDennehyWellerrecommendstheAxaFramlingtonJapanFundinTheSundayTimes。

However,giventhatfundsunderperformedin2006,investorsmaybebetterofflookingatinvestmenttrusts,manyofwhicharenowtradingatdecent-sizeddiscountsandshouldofferbetterreturns。

JPMorganFlemingJapaneseInvestmentTrust(9。

1%discount)andFidelityJapaneseValues(7%)aretwosuchtrusts。

Investmentfundstoavoid:over-hypedproperty

Prospectslooklessattractiveforcommercialproperty。

Itwasthemostpopularinvestmentareain2006,whichshouldsetalarmbellsringingwithsensibleinvestors。

Yetthesector’spopularitylookssettocontinuethisyear,boostedpartlybytheconversionofmanylistedpropertyfirmstoReits–low-taxinvestmenttruststhatofferinghighdividends。

“Ahugeamountofmoneyhasgoneintocommercialpropertythisyearandmyfeelingisthatwillcarryon,”saysMarkDampierofHargreavesLansdownintheFT。

“ButIdon’tparticularlylikeproperty。

Ithinkit’sover-hypedandsomeofmyclientsareputtingtoomuchmoneythere。

Somewanttoputover50%oftheirportfoliointopropertyandthatmakesmenervous。



Fundstoavoid:ignore‘contrarian’fundmanagers

Equallyworryingisthenumberoffundmanagerswhohavesuddenlygone‘contrarian’andbegunpluggingtheUSasthisyear’stopmarket。

JohnChatfieldRobertsofJupiter,forexample,tellsTheSundayTimesthatalthoughthereareconcernsovertheoutlookfortheeconomy,hebelievestheyareoverplayed,andhasincreasedhisweightingthere。

Andhe’snottheonlyone。

Nearlyathirdofthe14tipstersconsultedbyTheDailyTelegraphtippedtheUSastheirtopmarketfor2007–theindividualmanagersmightthinkthey’rebeingcontrarian,butthetruthisthatthere’ssomethingofaconsensusbuildingthattheUSisworthinvestinginnextyear,andonewearen’tsureweagreewith。

UK-basedinvestorsshouldnotethat,eventhoughtheDowJonesrose16%in2006,thedollarplungemeantthatinsterlingtermsthegainwasonly2%。

WiththeUShousingmarketstillinthegripofaslowdownthatcouldwellturnintosomethingfarworse,andthetwindeficitsstillloomingoverthedollar,thosecurrentlybettingontheUSseemfoolhardy,ratherthanbrave。

Bestfunds:agoodyearforgold

AnatoleKaletskyinTheTimesreckonsthebiggestriskstotheglobaleconomyin2007“stemnotfromeconomicsbutfromgeopolitics:mostplausiblyanoutbreakoffull-scalewarintheMiddleEast,perhapsprecipitatedbya‘pre-emptivestrike’byIsraelagainstIran”。

Hemaybebrushingoffeconomicdangersrathertoocasually,butthere’snodoubtthatgeopoliticscouldbethesourceofsomeofthisyear’snastiestsurprises。

Andthetwoinvestmentsmostlikelytobenefitdirectlyaregoldandoil。

Goldistheultimatesafe-haveninvestmentandwillalsobenefitfromthedollar’scontinuedweaknessascentralbanksandinvestorslooktoswaptheirdollarsforsomethingmorereliable。

Asforoil,anydisruptionintheMiddleEastcouldsendthepricesurgingagain–forexample,Iran’sthreattoshutthestraitsofHormuzwouldpreventafifthofworldoilfrommakingitswaytomarket。

Oneoftheeasiestwaystoprofitisviaexchangetradedcommoditiesinoilandgold(seewww。

etfsecurities。

comformoredetails)。

OrMerrillLynchGoldandGeneral,JPMorganNaturalResourcesandInvestecGlobalEnergy,whichallinvestincommodity-relatedstocks。

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