Mark Dampier: Make sure your portfolio can handle a bumpy ride

The Analyst

It seems the downgrading of global growth expectations, rather than the downgrading of US debt by S&P, was the main catalyst for recent stock markets falls. The lack of political leadership both in the United States and in Europe hardly helped, and while I hope the market gyrations do not continue at the level we have seen, I cannot pretend sovereign debt problems have been solved or that the outlook is rosy.

Probably the best we can hope for is a mid-cycle slowdown, a natural development for this point in the economic cycle. Many fund managers I have spoken to support this theory as opposed to a return to out-and-out recession. The problem is that the GDP growth rebound has been muted despite unprecedented stimulus. It is not the rapid recovery many were hoping for, and reducing the level of borrowing through austerity measures, while necessary to restore confidence, is adding to fears we will slip back into recession.

This is the type of environment we will see for some time in the West, and Ben Bernanke's pledge to keep interest rates low for at least two years is evidence of the level of concern. So how do investors respond? If it is keeping you awake at night the answer is probably to keep most of your money in cash, even if low rates persist. If you want more income, you have to take more risk – there is no getting around it. For all investors, portfolios need to be constructed more carefully than ever. Too many want a high-octane portfolio when the market is going up and a cautious one when it is going down. This is never achievable because of the impossibility of market timing, especially in an economic climate of extreme uncertainty. Instead, I would look to blend defensive and aggressive funds according to your level of risk.

First let's look at the notable opportunities that have arisen from market falls. If you believe a full-blown recession will be avoided, oil exploration companies look very cheap and priced to reflect oil at $60 a barrel rather than the current value of around $100. Many small exploration and production companies have fallen 35 per cent to 70 per cent during the turmoil and an investment in Junior Oils Trust, a portfolio concentrating on profitable small producers, is a fund to consider. I am also a strong believer in gold and BlackRock's Gold & General Fund. In the short term physical gold looks a little overbought, but gold mining shares, like oil shares, look cheap relative to the physical commodity. Investors could also consider a broader equity fund, and for those who want aggressive exposure to the UK market, Standard Life's UK Equity Unconstrained, which favours more economically-sensitive areas such as industrials and mining, is an obvious choice. For investors seeking a defensive approach, absolute return funds could be used. Philip Gibb's Jupiter Absolute Return Fund has actually risen modestly during the crisis and remains a good diversifier for a portfolio. Troy Trojan, Miton Strategic Portfolio and Jupiter Strategic Bond could all be considered too. In addition large, international blue chips look cheap and I would suggest Lindsell Train Global Equity, which is full of quality companies with strong brands.

Finally, I do think income will play a much greater role in an investor's total return in the next few years, and recent falls in the market should highlight the attractions of UK equity income funds such as Neil Woodford's Invesco Perpetual Income and Bill Mott's PSigma Income. For more international exposure, the Newton Global Higher Income fund is a sensible option.

The market is likely to stay volatile for a while. It is a time to make sure your portfolio can ride out the storm and remember no single fund necessarily has the answer.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
David Moyes and Louis van Gaal
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
A cabin crew member photographed the devastation after one flight
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Life and Style
food + drink
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
Life and Style
Arts and Entertainment
The John Peel Lecture has previously been given by Pete Townshend of The Who, Billy Bragg and Charlotte Church
musicGodfather of punk will speak on 'free music in a capitalist society'
peopleAt least it's for a worthwhile cause
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Quantitative Risk Manager

    Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

    Day In a Page

    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments