Each week, a professional investor tells MoneyWeek where he'd put his money now. This week:Shaun Port, chief investment officer, Nutmeg.
At Nutmeg, our approach to investing is founded on four core principles. Firstly, we focus on spreading risk so that our customers aren't exposed to the fortunes of just a handful of stocks and can benefit from gains in a range of diversified investments. We build and run global portfolios for our clients that can contain thousands of individual security holdings.
Secondly, we build and manage portfolios that are tailored to a customer's risk profile. A lot of people simply opt for a managed fund from one of the many best-buy lists they see published in the press, without necessarily understanding exactly how much risk they're really taking.
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We think investors are better served by a portfolio that is aligned to their financial goals and specific risk tolerance.
Thirdly, keep it simple. Simple is the ultimate in sophistication. It may not be exciting, but owning an index fund that tracks the market at very low cost can be much more effective than owning a broad range of individual stocks that you hope have the potential to double.
By building a portfolio made up of ten to 12 exchange-traded funds (ETFs), you can capture more than 80% of global market returns.
Finally, we believe in regularly reviewing and rebalancing a customer's portfolio to help keep it on track not just with their risk tolerance, but also with our views on economic, political and market developments.
As a result of all this, I generally favour buying ETFs because they provide the required range of investments for a diversified portfolio, and can be traded quickly and cost-effectively.
Here are three ETFs that I think make for excellent investments in the current climate.
My first is a play on the US equity market, which continues to look like a solid long-term investment opportunity. The US economy is in good shape, reporting decent growth, steadily rising wages and improved corporate profits.
The S&P 500 is an obvious starting point when looking to invest in US shares, but I'd specifically pick out the iShares S&P Small Cap 600 ETF (LSE: ISP6), which gives exposure to a diversified range of small-cap companies that are more leveraged to the domestic economy.
Japan is another market I like right now.We saw excellent returns from Japanese equities in 2014, and I think there are at least two years of continued strong growth in the market. Japan has such a large domestic market that Japanese companies can produce excellent returns even in tough market conditions elsewhere.
However, the slowdown in Chinese growth rates is a worry and the Bank of Japan's quantitative easing (QE) programme leaves the yen looking vulnerable, so we've been using a currency-hedged ETF to protect against weakness in the yen the UBS ETF MSCI Japan 100% Hedged to GBP (LSE: UC61).
Closer to home, I think there are some very good opportunities in Europe. The UBS MSCI EMU 100% Hedged to GBP ETF (LSE: UC59) is a higher-risk pick, with potentially higher rewards.
The eurozone is still subject to much uncertainty and volatility, but the central bank's recent efforts and the introduction of a substantial QE package have boosted the region and various countries within Europe such as Germany are responding well to the weaker euro and lower oil prices.
