Asset allocation is at least as important as individual share selection. So where shouldyou be putting your money? Here's July'stake on the major asset classes
Get the best rate you can
Cash plays an important role in a portfolio: it provides stability and means you are in a position to buy when a market panic creates bargains.
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But with no major central banks yet willing to raise interest rates, returns on cash remain low The US Federal Reserve might tighten policy later this year, but we'd be surprised to see the Bank of England act until well into 2016.
Still, the sharp drop in UK inflation this year has meant that the best real (after-inflation) rates are better than they have been for some time. So shop around to make sure you're getting a good deal on your savings.
Bonds
Don't chase higher yields
Bond yields rose slightly in June(meaning that the market price of existing bonds fell), although the escalation of the Greek debt crisis saw investors begin to shift back into safer government bonds, such as the US, the UK and Germany.
But central-bank intervention has made bond markets dysfunctional: BBB-rated eurozone countries, such as Italy and Spain, still offer lower yields (around 2.3% on a ten-year bond) than AAA-rated Singapore, despite the potential spillover from the Greek crisis.
We think that the only remaining appeal in most bonds is as a safe-haven asset and investors should focus on the least-risky debt. Chasing higher yields is likely to end in disaster.
Equities
The FTSE struggles
Stockmarkets have slid over the past month, although not by as much as might have been expected, given the eurozone problems. The FTSE 100 was a notably poor performer, down almost 5% due to weakness among commodity stocks and concerns that the strong pound would hurt export earnings.
We don't believe that stocks in general offer exceptional value, but think they are the least worst option. Some markets, such as Japan, remain relatively cheap.
Precious metals
Hold on to gold
Gold failed to benefit from the uncertainty over Greece, closing the month around 1.5% lower. Since the yellow metal usually performs strongly during crises, this may be a sign that markets are still complacent about a deal being done.
We expect it to do well if Grexit becomes a reality and recommend holding a small part of your portfolio in gold as insurance against this, as well as against the long-term return of inflation.
Property
London booming
London's commercial property market continues to boom: new leases in the first half of the year hit 6.3 million square feet, the highest since 1998, according to estate agents Cushman & Wakefield. Strong demand should ensure that investors earn reasonable returns, even though prices are high by historic standards pushed up by an ongoing influx of money from overseas investors, such as pension funds and insurers.
Energy
Iran could add to supply glut
Brent crude, the oil industry benchmark, ended the month at $63.50 per barrel, down around 3%. But the outlook for later this year is increasingly bearish. If negotiations over an agreement to curb Iran's nuclear programme are successful, that would bring an end to sanctions against the country and lead to increased exports of Iranian oil.
With the market already oversupplied, this could push prices as low as $40-$50 per barrel, according to some forecasts.
Agriculture
A long-term boom
Pressure on global food supplies is likely to rise over the long term due to rising incomes in emerging markets. This should lead to greater consumption of meat, but is also likely to increase demand for commodities such as coffee, sugar and chocolate as people's diets become more Westernised.
Rather than trading commodity prices, which can be very volatile, investors can play this theme through food and fertiliser stocks.
