Want to know where to invest for the next 10 years? Here’s what the pros suggest
Volatile markets, inflation hitting new highs and the risk of recession are making things tough for investors right now. “Looking out over the next 10 years, the forces that drove the rapid outperformance of growth over value are unlikely to repeat,” Paul Danis, head of asset allocation at Brewin Dolphin , told CNBC. “Bond yields have hit a structural low, and relative valuations remain elevated. Regulators have become more focused on reining in the already very dominant mega-cap platform companies.” But there are pockets of opportunity, according to a number of market experts, especially when it comes to more longer-term investing. Here, CNBC PRO asks them where to invest with a decade-long timeline. Where to invest For Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown , a 10-year investment horizon can allow investors to take on more risk. “One option is to invest in funds with a focus on smaller companies in emerging markets, for example, where there could be the potential for greater growth,” she told CNBC via email. However she did stress the importance of diversification in terms of sectors and geographies, as well as considering potential political volatility and regulation in emerging markets. Vincent Mortier, group chief investment officer at asset manager Amundi , also said emerging markets might look attractive on this timeline. He noted that uncertainty regarding equities “remains high,” and as such recommended considering different assets to invest in. “We maintain our positive view on EM [emerging market] bonds in hard currency due to their attractive valuations and exposure to commodity exporters,” he told CNBC via email. “Regarding currencies, we continue to hold a positive view on the U.S. dollar vs. the euro.” Amundi — Europe’s largest asset manager, with $2.247 trillion under management — favours the U.S. over Europe, and remains neutral on EM, Mortier said. He added that investors could also consider “real assets” (or physical assets, such as real estate and commodities) as a way to combat inflation in the longer term. Hargreaves Lansdown’s Streeter flagged ESG (or environmental, social and governance factors) as another thing to consider. “It would be worth looking at funds with an ESG focus, honing in on larger technology, pharmaceutical or financial companies which aim to deliver long-term growth in a responsible way,” she said. She named U.K. healthcare firm Smith & Nephew as one such example, which she said is set to benefit as hospitals catch up with operations delayed due to the pandemic. “In particular there should be significant potential for the group’s Sports Medicine and Orthopaedics businesses,” she said. Big Tech Despite massive volatility in tech over recent months, the big U.S. names are more likely to be able to deal with inflation in the longer term, according to Streeter, who picked out Microsoft , Apple , Amazon and Alphabet . “This is partly because they have the resilience of big piles of cash to fall back on, but also because of their brand pulling power, and the fact that their technology infiltrates every part of our daily lives,” she told CNBC via email. Microsoft “makes software the world doesn’t know how to live without,” Streeter added, and she also likes its gaming revenues as well as its cloud business. Read more ‘We see a clear role for alternatives’: Pros give their tips on how to trade the volatile market Goldman says buy these global stocks to play $900 billion EV opportunity — names one with 50% upside Tech the new value stocks? Here are the 10 cheapest names in the tech space However, Amundi’s Mortier sounded a note of caution on Big Tech, noting that performance at the five largest companies has waned. “We believe this trend will continue in the coming years as growth for the largest companies matures, regulation increases and investors look elsewhere for returns,” he told CNBC via email. The tech-heavy Nasdaq is down around 28% year-to-date. Contrarian views Asked whether he holds any contrarian views on where to invest, especially over a 10-year timeline, Danis said the Chinese market is one that Brewin Dolphin believes will provide “relatively strong gains over the longer term.” While the Chinese government has clamped down on tech giants, for example, by introducing anti-monopoly guidelines and focusing on ” common prosperity ,” Danis said this is “arguably now fully reflected in valuations.” “The dominant market emotion toward China right now is fear. As Warren Buffett says, you want to be greedy when others are fearful. There is lots of room for investors to warm up to China … While China’s authorities are taking greater control, it’s still going to remain an extremely innovative and entrepreneurial place. Productivity growth is likely to remain relatively strong,” Danis added. What to ask your financial advisor “The question to ask an investment advisor is whether your investments still suit your circumstances, if your financial work or retirement situation has changed or if you have a new objective for your investments,” Streeter said. Investors should also think about their attitude to risk and whether their portfolio needs to be adjusted accordingly. “Rather than looking at a short-term performance of particular investments, it’s important to look over a longer time horizon, ideally at least 5 years, rather than getting drawn in to the twists and turns of short term performance. Investors should also ask what the relative costs are of their investments,” she added.