Investment Advisory: Public Trust Recommends Investors Review Their Strategy
Rising interest rates and rapid growth in the world’s economies will change the investment environment over the coming
quarters, according to Public Trust Investment Funds Manager Colin Thomson.
“Instead of having to deal with shrinking growth and the danger of falling prices, investors will need to consider the
implications of rapid growth and the risk of a sharp rise in inflation,” Mr Thomson said.
“If central banks have to raise interest rates significantly to contain inflation, it could affect investors’ returns,
as higher interest rates can cause share and bond values to fall.”
Mr Thomson recommends that in light of these changing circumstances investors review their investment strategy.
“Investors who took our advice and held on to their multi-sector fund investments despite previous gloomy news have been
rewarded over the last few quarters with near record returns.
“But the markets never stand still. With world economies recovering and inflation rising it is likely that interest
rates will also rise. And when rates rise, bond capital values and share prices tend to retreat.
“For investors, this means that returns from multi-sector funds are not likely to be as high as they have been over the
past year. The markets may also be more volatile – moving up or down in response to changes in interest rates as the
central banks try to control inflation,” Mr Thomson said.
Public Trust believes that investors who rely on their investments for regular income may need to be more cautious in
their approach over the coming quarters. Higher returns may be provided at the risk of lower capital values.
Furthermore, investors who wish to achieve the same level of growth in their investments may have to increase their risk
in order to do so.
“It’s important to regularly review your investment strategy. First, to make sure that your investment portfolio still
suits your circumstances and second, to make sure that the future expected returns and risks are still acceptable.
“We believe that the changing environment presents a strong reason for investors to reassess their risk profile and make
the appropriate adjustments to their managed fund portfolios,” Mr Thomson said.