Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to ErroneousBee,GSVsowhat,Shelford,Hypster,Wasron, for Donating to support the site

Greatest investment risks in 2021?

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
TUK020
Lemon Quarter
Posts: 1197
Joined: November 5th, 2016, 7:41 am
Has thanked: 338 times
Been thanked: 683 times

Greatest investment risks in 2021?

#370000

Postby TUK020 » December 27th, 2020, 8:22 am

Would be very interested in this board's view of what are the greatest investment risks on the horizon, and what people are doing to position their portfolios against them.
The biggest uncertainty that I really don't know how to judge is the threat that inflation will take off if pent up demand lets rip in a post vaccine world, and a system awash with monetary stimulus results in rampant inflation.

Aminatidi
Lemon Slice
Posts: 321
Joined: March 4th, 2018, 8:22 pm
Has thanked: 40 times
Been thanked: 87 times

Re: Greatest investment risks in 2021?

#370001

Postby Aminatidi » December 27th, 2020, 8:28 am

I don't know as I'm dumb but inflation is what I keep hearing I should be positioned to defend against.

johnhemming
Lemon Quarter
Posts: 4694
Joined: November 8th, 2016, 7:13 pm
Has thanked: 10 times
Been thanked: 541 times

Re: Greatest investment risks in 2021?

#370005

Postby johnhemming » December 27th, 2020, 9:01 am

I think the UK stockmarket is undervalued and the US tech specifically is overvalued. It may, however, take a while for anything to happen to the US tech sector. I think inflation is a risk probably more asset value inflation and I therefore think the main risk is being underinvested and I also think there is risk between fixed interest and equity (I think equity will do better than fixed interest).

Brexit uncertainty has held back the UK for 4 years. Although I don't personally like the certainty it will be an easier environment in which to make investment decisions. The market will come out of covid.

There will always be from time to time unknown unknowns, but those are best handled through diversification.

flyer61
Lemon Slice
Posts: 417
Joined: November 11th, 2016, 12:53 pm
Has thanked: 103 times
Been thanked: 134 times

Re: Greatest investment risks in 2021?

#370011

Postby flyer61 » December 27th, 2020, 9:21 am

Stupidity by Government, Inflation, the BBC......take your pick!

the BBC...you may think I am joking but they are setting many agendas that could seriously impact your investments in the UK. (I am long Boohoo)
They give succour to those calling for wealth taxes, Rashford and the need for the state to feed the masses (whatever happened to parenting), Hamilton and his support for BLM (which includes the extreme political message they espouse). Off to take my meds....

Wuffle
2 Lemon pips
Posts: 221
Joined: November 20th, 2016, 8:14 am
Been thanked: 74 times

Re: Greatest investment risks in 2021?

#370027

Postby Wuffle » December 27th, 2020, 10:05 am

Is the system really awash with monetary stimulus.
If it had all been dumped into the system while everybody kept working then it is obviously net positive, but they weren't.
How is this different to the mass early retirement of boomers (paid to do nothing) that led to the last decade?
We had some raging property appreciation though, but that apparently isn't inflation!

W.

77ss
Lemon Quarter
Posts: 1016
Joined: November 4th, 2016, 10:42 am
Has thanked: 85 times
Been thanked: 238 times

Re: Greatest investment risks in 2021?

#370030

Postby 77ss » December 27th, 2020, 10:09 am

TUK020 wrote:Would be very interested in this board's view of what are the greatest investment risks on the horizon, and what people are doing to position their portfolios against them....


We can all speculate, but I really have no idea, therefore I am taking no specific action. Incorrectly positioning ones portfolio to guard against risks that do not materialise (or materialise but have little effect) may be one of the worst things you can do.

This year has been (for me) a year when Investment Trusts stormed ahead and I shall just continue my 10 year old approach of gradually moving away from individual shareholdings. I expect IT managers stand a better chance of evaluating risks than I do.

stevensfo
Lemon Quarter
Posts: 1318
Joined: November 5th, 2016, 8:43 am
Has thanked: 819 times
Been thanked: 453 times

Re: Greatest investment risks in 2021?

#370033

Postby stevensfo » December 27th, 2020, 10:21 am

I admit that the whole inflation thing has me confused. For a start, I can't remember a time when people on TLF or TMF 'weren't warning about impending inflation. Surely, for stuff to increase in price, there have to enough people with money to afford the increased prices, and at the moment, I have the feeling that disposable incomes are worse than ever. Most of the TLF community are certainly not typical, and I know some of my relatives on average incomes are struggling. Re. inflation, I think that the RPI has been around 2-3% for a long time now. It sounds low, but it's quite sobering when you look at the effect over 10 years.

I can't help wondering if a lot of the talk about wealth tax is part of the old psychological trick to scare people into fearing the worst, so that when the government does introduce some sort of additional taxation, it will be accepted more readily. Most, though not all, people with expensive houses already pay more tax via Council tax, and not all of them would be able to pay a hefty tax charge without selling the house.

So as someone already said, the only thing we can do is to diversify and perhaps keep as much in ISAs as possible. I can imagine the government setting a limit to them or lowering the amount paid in annually, but I doubt that they'd change the actual ISA protection itself.

Steve

Itsallaguess
Lemon Half
Posts: 6248
Joined: November 4th, 2016, 1:16 pm
Has thanked: 2642 times
Been thanked: 4887 times

Re: Greatest investment risks in 2021?

#370040

Postby Itsallaguess » December 27th, 2020, 10:32 am

77ss wrote:
TUK020 wrote:
Would be very interested in this board's view of what are the greatest investment risks on the horizon, and what people are doing to position their portfolios against them....


We can all speculate, but I really have no idea, therefore I am taking no specific action.

Incorrectly positioning ones portfolio to guard against risks that do not materialise (or materialise but have little effect) may be one of the worst things you can do.


I try to look beyond detailed specifics when it comes to broader investment-risks nowadays, and just try to generally be in a position of taking a cautious 'LTBH / time in the market' approach, whilst normally ensuring that I've got an 'investable cash (or near cash) float' available to take advantage of any market slumps.

That approach has served me well for many years now, and it generally means that I can avoid worrying about the latest dark-cloud headlines, and just know that if 'something crops up', such as the COVID-related slump this year (it was the financial crisis, last time around..), then I'm in a position to take advantage of those issues, and be a buyer in those markets, rather than have to worry about more granular issues.

The carry-value of taking that position is not zero, of course, but I've found over the years that whatever the inflation-cost or the opportunity-cost that I might pay for carrying such a float in 'normal times', that cost is far outweighed by the personal benefits I gain from taking this approach, and benefiting from doing so when the inevitable 'opportunities' arise...

So I've given up worrying about 'specific risk', and have tried to build an 'almost-any-risk' defence into my overall long-term investment strategy...

Cheers,

Itsallaguess

jonesa1
2 Lemon pips
Posts: 184
Joined: May 27th, 2019, 9:47 am
Has thanked: 63 times
Been thanked: 95 times

Re: Greatest investment risks in 2021?

#370044

Postby jonesa1 » December 27th, 2020, 10:47 am

The most predictable risks are related to investor behaviour, e.g:
Over-reliance on China to drive investment growth, there's an ever-present risk that the Chinese government (or indeed the US government) does something which fundamentally under-mines the value of the biggest recent contributors to growth (Ant's withdrawn IPO may be a sign of things to come from the CCP).
Assuming that the future will be like the past, i.e. the big growth stories from 2020 will repeat in 2021
Assuming that the big growth stories from 2020 will mean revert in 2021

The mitigation, as ever, being diversification

There are a heap of other risks that could further harm the global economy and lead to a collapse in asset values (such as CV19 mutating in multiple ways that make vaccines ineffective). I'm less clear on how best to mitigate against those, diversification only goes so far when most asset classes are devaluing and it's not obvious that governments can keep repeating their recent stimulus efforts, nor that they have any other tools to deploy.

Andrew

Dod101
Lemon Half
Posts: 7283
Joined: October 10th, 2017, 11:33 am
Has thanked: 1731 times
Been thanked: 3021 times

Re: Greatest investment risks in 2021?

#370053

Postby Dod101 » December 27th, 2020, 11:16 am

To answer the OP's question, I think the greatest investment risk for 2021 is the currently unknown. As others have said the only way to guard against that is to diversify. The obvious risks have already been mentioned I think. Inflation, higher taxes, the Covid vaccines not working, and an unexpected fall out from the Brexit agreement (but that of course is covered by 'the currently unknown').

I am doing nothing specifically with my portfolio to guard against any of that.

Dod

tjh290633
Lemon Half
Posts: 5467
Joined: November 4th, 2016, 11:20 am
Has thanked: 473 times
Been thanked: 2192 times

Re: Greatest investment risks in 2021?

#370054

Postby tjh290633 » December 27th, 2020, 11:16 am

The biggest risk is not being in the market. There was an article in yesterday's Telegraph, suggesting thatb the FTSE could get into 5 figures before too long. I've thrown the paper out now, but I have found the article online at https://www.telegraph.co.uk/business/20 ... ve-digits/

It's behind a fireweall but there ways around it if you don't subscribe. The title is:

Roaring Twenties should finally propel ailing FTSE to five digits

A case of out with the old stocks, in with the new will help shake London's major market out of its slump

Dateline 24 Dec 2020. Author Matthew Lynn.

TJH

simoan
Lemon Slice
Posts: 849
Joined: November 5th, 2016, 9:37 am
Has thanked: 149 times
Been thanked: 458 times

Re: Greatest investment risks in 2021?

#370059

Postby simoan » December 27th, 2020, 11:32 am

tjh290633 wrote:The biggest risk is not being in the market. There was an article in yesterday's Telegraph, suggesting thatb the FTSE could get into 5 figures before too long. I've thrown the paper out now, but I have found the article online at https://www.telegraph.co.uk/business/20 ... ve-digits/

It's behind a fireweall but there ways around it if you don't subscribe.
TJH

I think it's best left behind a paywall tbh. And as for what I'd do with the paper version...

The greatest investment risk, as always, is listening to other people about what they think the future holds. There will be plenty of experts trying to foretell the future and making predictions about the financial markets in 2021 at this time of year, but the truth is they know no better than anyone else. Set your own investment goals to meet your own needs and seek out opposing views rather than those that confirm your own biases.

Most of all, ignore lazy generalisations. I've been hearing that the UK market is undervalued and US tech overvalued for the last 10 years, and yet the latter are some of the greatest companies that have ever existed on cash flow yields of 3-4% in a zero interest rate world.

All the best, Si

ReallyVeryFoolish
Lemon Quarter
Posts: 1292
Joined: October 5th, 2019, 12:06 pm
Has thanked: 1034 times
Been thanked: 577 times

Re: Greatest investment risks in 2021?

#370064

Postby ReallyVeryFoolish » December 27th, 2020, 11:47 am

With perhaps 99 per cent of commentators all saying 2021 is going to be a good year for investment, that's a sure sign they're wrong. Perhaps 2021, in the UK at least, may get off to a post Brexit flying start, but there's tons of scope for the wheels to come off in the year. I am sceptical.

The biggest risk to me, therefore, is everyone agrees on something. That's almost universally a bad signal.

RVF

TahiPanasDua
2 Lemon pips
Posts: 229
Joined: June 4th, 2017, 6:51 pm
Has thanked: 180 times
Been thanked: 130 times

Re: Greatest investment risks in 2021?

#370075

Postby TahiPanasDua » December 27th, 2020, 12:18 pm

flyer61 wrote:Stupidity by Government, Inflation, the BBC......take your pick!

the BBC...you may think I am joking but they are setting many agendas that could seriously impact your investments in the UK. (I am long Boohoo)
They give succour to those calling for wealth taxes, Rashford and the need for the state to feed the masses (whatever happened to parenting), Hamilton and his support for BLM (which includes the extreme political message they espouse). Off to take my meds....


You are The Ghost of Christmas Past and I claim my £5.

TP2.

richfool
Lemon Quarter
Posts: 2703
Joined: November 19th, 2016, 2:02 pm
Has thanked: 623 times
Been thanked: 602 times

Re: Greatest investment risks in 2021?

#370077

Postby richfool » December 27th, 2020, 12:20 pm

TUK020 wrote:Would be very interested in this board's view of what are the greatest investment risks on the horizon, and what people are doing to position their portfolios against them.
The biggest uncertainty that I really don't know how to judge is the threat that inflation will take off if pent up demand lets rip in a post vaccine world, and a system awash with monetary stimulus results in rampant inflation.

Thanks for posting this. Yes, interesting times and some interesting views.

My guess would be that the UK is undervalued and should recover somewhat in the light of the Brexit trade deal, subject to no flaws being discovered in the deal, later!

Also, surely the affects of monetary stimulus will continue to support markets and gold.

There must be continuing risks regarding China, its policies and interference.

(Though) I continue to maintain exposure to all the above.

airbus330
2 Lemon pips
Posts: 179
Joined: December 1st, 2018, 3:55 pm
Has thanked: 67 times
Been thanked: 85 times

Re: Greatest investment risks in 2021?

#370098

Postby airbus330 » December 27th, 2020, 1:35 pm

For what it is worth, not having a serviceable crystal ball, I think the USA will largely keep going up, with the odd retrenchment, because of the way it embraces the tech of tomorrow. The possibilities for companies like Tesla, if it maintains its tech lead and is not nobbled by politics are phenomenal. I think the UK will improve, in spite of the poor leadership skills of those in charge. I worry about the medium term consequences of hitting the magic money tree so hard and what happens when it stops.
If I learnt one thing this year, it is that doing nothing is more often than not, the right thing to do.

dealtn
Lemon Quarter
Posts: 2694
Joined: November 21st, 2016, 4:26 pm
Has thanked: 68 times
Been thanked: 902 times

Re: Greatest investment risks in 2021?

#370128

Postby dealtn » December 27th, 2020, 3:37 pm

Same as most years, unconscious bias.

richfool
Lemon Quarter
Posts: 2703
Joined: November 19th, 2016, 2:02 pm
Has thanked: 623 times
Been thanked: 602 times

Re: Greatest investment risks in 2021?

#370305

Postby richfool » December 28th, 2020, 10:00 am

richfool wrote:
TUK020 wrote:Would be very interested in this board's view of what are the greatest investment risks on the horizon, and what people are doing to position their portfolios against them.
The biggest uncertainty that I really don't know how to judge is the threat that inflation will take off if pent up demand lets rip in a post vaccine world, and a system awash with monetary stimulus results in rampant inflation.

Thanks for posting this. Yes, interesting times and some interesting views.

My guess would be that the UK is undervalued and should recover somewhat in the light of the Brexit trade deal, subject to no flaws being discovered in the deal, later!

Also, surely the affects of monetary stimulus will continue to support markets, commodities and gold.

There must be continuing risks regarding China, its policies and interference.

(Though) I continue to maintain exposure to all the above.

Noting the Trump has now signed the stimulus bill, I should have added, during the autumn I increased my exposure to miners, commodities and gold, through: BERI (Blackrock Energy & Resources Income Trust) and CYN (City Natural Resources Growth & Income trust).

I already held exposure to the Canadian Dollar, a commodity currency, through MCT (Middlefield Canadian Income Trust), and gold miners: POLY (Polymetal) (includes income) & GGP (Greatland Gold)(speculative).

UncleEbenezer
Lemon Half
Posts: 5884
Joined: November 4th, 2016, 8:17 pm
Has thanked: 787 times
Been thanked: 1287 times

Re: Greatest investment risks in 2021?

#370390

Postby UncleEbenezer » December 28th, 2020, 12:23 pm

Surely the biggest risk is the unknown unknowns!

Inflation has moved: it now manifests not in consumer price indexes but in asset prices. The rise of cheap imports from China gave us the Blair Feelgood, and UK interest rate policies that worked well for China's economy but led to rampant inflation (manifested first in house prices, and after the bust in other assets) in Blighty. To date, money-printing has kept that going, even through the major damage to the real economy of brexit and covid. The big unknown now is how long that has to run, and what happens when it crashes.

What we now have is vertiginously-overvalued Sterling. It's protected somewhat by the largely-similar behaviour of the Dollar and Euro, and suspicion of other currencies. In that context, five-digit FTSE makes sense, and so does a global portfolio. On the other hand, a million-quid lifetime limit on pension savings won't get you much of an annuity, nor will you get much of a house from the 25% lump sum. It's been easier to save £100k post-2008 than to save £1k in the 1980s, but the things one might want to save for have left our portfolios in the dust!

simoan
Lemon Slice
Posts: 849
Joined: November 5th, 2016, 9:37 am
Has thanked: 149 times
Been thanked: 458 times

Re: Greatest investment risks in 2021?

#370398

Postby simoan » December 28th, 2020, 12:40 pm

UncleEbenezer wrote:Surely the biggest risk is the unknown unknowns!

Yes, a global pandemic, for instance! How many people saw that one coming this time last year? That's why these kind of discussions are so pointless. I wonder what Terry Smith would say if you asked him? Probably, something very detrimental to your good name interspersed with four-lettered words...

All the best, Si


Return to “Investment Strategies”

Who is online

Users browsing this forum: No registered users and 7 guests