How and why our experts would invest £1,000 in the New Year

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By Jeff Prestridge for The Mail on Sunday 22:16 26 Dec 2020, updated 22:16 26 Dec 2020

Brian Dennehy, Fundexpert: Fly with British Airways

‘I would invest in International Consolidated Airlines Group (IAG) – British Airways in old money. This share, listed in London, should be a reasonably straightforward way to double your money in 2021.

‘Why? Well, there is massive pent-up demand for holidays while IAG shares are an obvious target for investors looking for a brighter 2021 and who have a lot of cash to put into the market – be it retail investors, UK institutions, or global investors who are massively under-invested in Britain.

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‘The big caveat, of course, is the virus taking a new and more dangerous path – so I would apply a stop-loss. I would sell the shares if they fall 15 per cent below my buying price – £1.60. So £1.36 and I’m out. But I’m confident I’m backing a winner.’

Jason Hollands, Tilney: No place like home

‘I would put the £1,000 in investment fund Fidelity Special Situations – via a tax-free Isa. It targets unloved and undervalued UK companies with bounce-back prospects – rather than those funds that are currently fashionable and trading on expensive valuations.

‘I am convinced that 2021 – post Friday’s Brexit deal – will be a year of economic recovery in the UK.

‘The UK stock market is undeniably cheap compared to other developed markets. It has had a terrible 2020, but it also has potential to be the star of next year, given it has big exposure to economically sensitive areas such as energy and banking that have been pummelled during the pandemic. 

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‘The UK economy isn’t out of the woods yet and faces the challenge of high unemployment, but with coronavirus vaccines here, it’s almost impossible for things not to get better in 2021.

‘Dividends, after being aggressively slashed this year, will start to rise again, as the vaccination programme rolls out. And people are itching to shop, socialise and travel after many months being caged up. Good news for the UK stock market. Good news for Fidelity Special Situations.’

Ben Yearsley, Shore Financial Planning: Small is beautiful

‘I would back British and invest in investment trust Montanaro UK Smaller Companies. There are many reasons. 

‘First, long-term investors should be overweight in smaller companies as revenues and profits ought to grow faster than in larger companies – and this is what ultimately drives share prices. 

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‘Second, smaller companies often operate in more niche, newer markets that make them exciting long-term investments. UK smaller companies have been ignored for many years and it’s time for them to shine.

‘There has already been a raft of takeovers this year in the smaller companies sector, highlighting the value on offer. The reason for Montanaro is due to the quality of its investment team led by the effervescent Charles Montanaro. They like simple, growing businesses that generate lots of cash. Healthcare and technology are two of the key themes in the trust’s portfolio.’

Ros Altman, financial expert 

Ros Altman would invest the money into a self-invested personal pension

‘First, I would invest the money into a self-invested personal pension. By doing that, I get tax relief on top.

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‘So, if I pay basic rate tax, my £1,000 becomes £1,250. If I pay higher rate tax, I would have £1,666 once tax relief is added.

‘With more money to invest, even if my investments fall, I would still have more in my fund than if I had invested in an Isa or outside a pension. I’ll leave you to decide what tax bracket I fall into. As for specific investments, I am not prepared to say. But I believe shares should do better than bonds. I would buy investment trusts that have paid good dividend income for many years from well-managed global equity portfolios.

‘I would look to invest in exchange traded funds investing in Asian markets, as I think growth there will outstrip western economies.

‘In addition, I would put some money into funds that aim to benefit from climate change adaptation and reduce carbon and plastic pollution.

‘Finally, a slice of my money would buy some gold as a hedge.’

Darius McDermott, Chelsea Financial Services: Back good old Blighty

‘If I had £1,000 to invest, I would be a contrarian and go for the most unloved stock market in the world – the UK. Since the Brexit referendum, both global and domestic investors tended to shun the UK market in favour of overseas investments. 

‘Also, most stock markets have recovered to their pre-Covid highs, but the FTSE 100 has not. Britain has a new variant of Covid, which has put further pressure on the UK stock market and currency.

‘So my fund choice would be Artemis Income which I think gives an opportunity to make good money over a five-year basis.

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‘It’s a core UK fund run by three managers with bags of experience. And remember, given the cuts in dividends this year, there is scope for dividend growth in 2021 too. If you don’t want or need to take the income you can reinvest it for growth.’

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