Where to place your bets if shares seem too cheap to shun any longer

America, Japan, the emerging economies, corporate bonds ... as time ticks away for using this year's ISA allowance, Julian Knight and Kate Hughes report on possible destinations for investors who see the chance of a profit amid the stock market turmoil

These are tough times for stock market investors as the credit crunch and recession wreak havoc on econo-mies from the US to Japan. But with the end of the tax year looming, Britons have to decide whether to take advantage of this year's individual savings account (ISA) allowance of £7,200. And those brave souls who see a potential profit amid the equity mayhem must then settle on where they are going to put their cash. Each major stock market or investment area has its pluses and minuses for the years ahead; here, we take a look at each.



America

The US was the first into the credit crunch and economic downturn, and so, according to some, it will be the first out. "The US was quicker to cut interest rates than the UK and has a dynamic economy with a history of bouncing back. I feel broadly positive," says Ben Yearsley from independent financial adviser (IFA) Hargreaves Lansdown.

However, there is a risk that currency shifts could erode returns. "When buying into the US, you're converting pounds to dollars, and when selling up, vice-versa," he adds. "If the dollar depreciates against the pound while you're invested in the US then you can find that returns are reduced."

In addition, Mr Yearsley is not impressed by many US fund managers. "The Martin Currie group has a good, consistently performing fund, but other than this perhaps the best way to enjoy market growth is through buying a tracker fund."



Emerging markets

The major emerging economies of Brazil, Russia, India and China have suffered as a result of the recession in their biggest market – the west. Russia has been worst hit as it has also seen a dramatic fall in oil and gas revenues. But, says Mr Yearsley, brighter times could be just around the corner: "As the west recovers, so will these emerging economies, and some of the stock markets are looking decidedly cheap at present, particularly Russia."

Mr Yearsley likes the look of the Hexam Global Emerging Markets fund, which he believes is well placed to take advantage of any upturn.



Corporate bonds

Investing your ISA allowance in corporate bonds can offer security and a steady income. These bonds are basically IOUs for money you lend to a private company. They are more risky than government gilts or savings accounts because the company may fail, but businesses are rated according to their reliability, and individuals can usually only invest in "A" grade bonds.

They cost around £100 each, depending on wider market conditions, and investors buy a number of bonds. Their money is tied up for a set period and fixed-interest or yield payments are made on a monthly or annual basis, ending with a final payment and the return of the original capital. People could choose to invest in a corporate bond unit trust fund, which puts money in a basket of company shares so that that even if one or two default, overall returns should be positive.



UK equity income

These funds, which can be rolled up into an ISA, spread investors' money across a number of companies. You could choose to look for ones that aim for growth in share values and a regular dividend payment.

Tim Cockerill, head of research at Rowan Capital Management, says: "Equity income funds are offering around 6 per cent average annual income at the moment. Threadneedle UK Equity Income is a highly regarded fund offering 6.5 per cent, for example. The UK stock market and economy will recover and I suspect in time, we will see this period as one offering exceptional value."



Japan

Investing in a Japanese fund isn't for the faint-hearted. The economy has been struggling for more than a decade and the global slump hasn't helped. For instance, the country's exports were down 20 per cent in 2008. Advisers suggest having only a small part of your portfolio in this sector.

"Like the rest of the world, Japan is suffering from the economic downturn," notes Darius McDermott at IFA Chelsea Financial Services. "But with its focus on car manufacturing and exporting, there are additional difficulties. Having said that, neither Japan's banks, nor its individual consumers, are close to as indebted as they are in the UK."

Fearless investors who feel that now is Japan's moment to begin recovery could consider the Jupiter Japan Income fund. It has lost 1.7 per cent over the past year, but bear in mind that, globally, equities have fallen as much as 40 per cent.



Absolute returns

These funds are designed to offer you a positive performance regardless of what the economy is doing. They aim to achieve this by putting your money into corporate bonds, cash and index- tracking investments. Last year was an incredibly difficult one, with UK equities dropping some 40 per cent, but astonishingly, some absolute return funds recorded positive performance. Two of the best are BlackRock UK Absolute Alpha and Threadneedle Absolute Return Bond, but watch out for high management fees with this type of fund.



Global growth

Investing in global funds means you have access to a far wider range of sectors and regions. But there are risks in looking overseas, particularly in terms of currency fluctuations and geopolitical risks. Some global growth funds will invest in emerging markets and some won't.

Interested investors could con- sider M&G Global Basics or the Neptune Global Equity fund, Mr McDermott suggests.



Europe excluding UK

Investing in Europe again offers a wider range of companies and industries. The euro-sterling exchange rate has been bad for holidaymakers but great for British investors in Europe: invest in this region and you could hope for 8 per cent annual growth – though again you can't depend on that given the volatility of the global economy. That said, equities are incredibly cheap right now as the downturn in underlying share prices is based on economic doubts, not the value of the companies themselves. The BlackRock Continental Europe fund is a favourite among financial advisers for this sector.

Sport
The Pipes and Drums of The Scottish Regiments perform during the Opening Ceremony for the Glasgow 2014 Commonwealth Games at Celtic Park on July 23, 2014 in Glasgow, Scotland.
Commonwealth gamesThe actor encouraged the one billion viewers of the event to donate to the children's charity
Sport
Members of the Scotland deleagtion walk past during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Sport
Shinji Kagawa and Reece James celebrate after the latter scores in Manchester United's 7-0 victory over LA Galaxy
football
PROMOTED VIDEO
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
Life and Style
fashion Designs are part of feminist art project by a British student
News
Very tasty: Vladimir Putin dining alone, perhaps sensibly
news
Life and Style
Listen here: Apple EarPods offer an alternative
techAre custom, 3D printed earbuds the solution?
Arts and Entertainment
Top guns: Cole advised the makers of Second World War film Fury, starring Brad Pitt
filmLt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a uniform
News
The University of California study monitored the reaction of 36 dogs
sciencePets' range of emotions revealed
News
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
Arts and Entertainment
A scene from Shakespeare in Love at the Noel Coward Theatre
theatreReview: Shakespeare in Love has moments of sheer stage poetry mixed with effervescent fun
News
Joining forces: young British men feature in an Isis video in which they urge Islamists in the West to join them in Iraq and Syria
newsWill the young Britons fighting in Syria be allowed to return home and resume their lives?
Arts and Entertainment
The nomination of 'The Wake' by Paul Kingsnorth has caused a stir
books
News
i100
Life and Style
food + drinkZebra meat is exotic and lean - but does it taste good?
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    PMO Analyst - London - Banking - £350 - £400

    £350 - £400 per day: Orgtel: PMO Analyst - Banking - London - £350 -£400 per d...

    Cost Reporting-MI Packs-Edinburgh-Bank-£350/day

    £300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...

    Insight Analyst – Permanent – Up to £40k – North London

    £35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

    Test Lead - London - Investment Banking

    £475 - £525 per day: Orgtel: Test Lead, London, Investment Banking, Technical ...

    Day In a Page

    Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

    Screwing your way to the top?

    Good for Lana Del Rey for helping kill that myth, says Grace Dent
    Will the young Britons fighting in Syria be allowed to return home and resume their lives?

    Will Britons fighting in Syria be able to resume their lives?

    Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
    Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

    Beyoncé poses as Rosie the Riveter

    The wartime poster girl became the ultimate American symbol of female empowerment
    The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

    The quest to find the perfect pair of earphones

    Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
    US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

    Meet the US Army's shooting star

    Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
    Climate change threatens to make the antarctic fur seal extinct

    Take a good look while you can

    How climate change could wipe out this seal
    Should emergency hospital weddings be made easier for the terminally ill?

    Farewell, my lovely

    Should emergency hospital weddings be made easier?
    Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

    Crowdfunded novel nominated for Booker Prize

    Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
    Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

    Vladimir Putin employs a full-time food taster

    John Walsh salutes those brave souls who have, throughout history, put their knives on the line
    Tour de France effect brings Hollywood blockbusters to Yorkshire

    Tour de France effect brings Hollywood blockbusters to Yorkshire

    A $25m thriller starring Sam Worthington to be made in God's Own Country
    Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

    Will The Minerva Project change the face of higher learning?

    The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
    The 10 best pedicure products

    Feet treat: 10 best pedicure products

    Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
    Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

    Commonwealth Games 2014

    Great Scots! Planes and pipers welcome in Glasgow's Games
    Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

    Jack Pitt-Brooke

    Manchester City and Patrick Vieira make the right stand on racism
    How Terry Newton tragedy made iron men seek help to tackle their psychological demons

    How Newton tragedy made iron men seek help to tackle their psychological demons

    Over a hundred rugby league players have contacted clinic to deal with mental challenges of game