Asset allocation is at least as important as individual share selection. So where should you be putting your money? We give our monthly view on the major asset classes.
Commodities
Too much gloom and doom
China faces plenty of problems
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We also still like agricultural commodities' long-term prospects, based on growing, increasingly wealthy populations, and the squeeze on arable land. The best approach is to bet on fertiliser and farm equipment stocks. But it may be best to avoid the potash sector for now, as the collapse of one of the cartels controlling the market has hammered prices.
Precious metals
Insure your portfolio with gold
We continue to see it as the best form of insurance against financial instability and a failure of trust in the monetary system. Keep 5%-10% of your portfolio in gold. Silver, which tends to mimic gold's moves, but magnify them, has made a comeback too. While we like silver, it's far more volatile than gold stick with the yellow metal unless you have a hefty appetite for risk.
Energy
The future belongs to gas
But keep an eye on the oil price. While Syria is not an important oil producer, the dangers of tension spilling out into wider conflict in the Middle East mean that oil has acquired a significant political risk premium. In the absence of any immediate action, the oil price is likely to decline. But it's worth remembering that spiking oil prices have accompanied most major recessions of the past 30 years, including the 2008 crisis.
Property
A recovery built on sand
determined to inflate another property bubble
Given that interest rates will be forced higher at some point in the not-so-distant future, it's hard to see UK property as a good investment right now. Better to play any short-term bounce through easily bought-and-sold housing-related stocks, rather than investing in buy-to-let. In America, meanwhile, fears over rising mortgage rates have pushed housing-related stocks back into a bear market after a long bull run. With US rates still ticking higher, it makes sense to stay out of the market, certainly until the path of the taper' is clearer.
A better bet is German property (which we looked at in detail last month), where loose European monetary policy and a relatively strong economy is driving prices higher after an extremely long stagnation. Japanese property is making a similar recovery, although it's probably easier to play Japan's story through a general stock-market investment rather than property specifically.
Bonds
Keep out of the way
markets may be running ahead of themselves
Equities
Go against the tide
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