Ditch Brazil, buy Russia

Christmas is the perfect time to review your portfolio. John Stepek looks at the best and worst-performing funds of 2016.


Brazil: a great year, but the party's over
(Image credit: © Cultura Creative (RF) / Alamy Stock Photo)

There's no particular reason to review your portfolio at Christmas, rather than at some other time of year. However, it's often the only chance you get to sit down for an hour and do otherwise easily neglected jobs. So in the spirit of "buy low, sell high", should you take the time this year to sell your top performers and perhaps invest in a struggling sector?

A glance at the top-performing funds of 2016 (see below) makes it clear that the biggest investment story was the commodities bounce, while Brazil and Russia are close runners-up. We'd be wary of adding money to gold miners just now. They have already turned down if you'd bought the Charteris fund at the start of 2016 and still hold it, you'd have doubled your money but if you'd sold at the peak in August, you'd have trebled it. With the market still betting on a strong US dollar and rising US interest rates, gold may struggle until inflation takes off.

We suspect that this will indeed happen, but it might take a while for the market to agree. We're more comfortable with miners in general. Optimism on growth should boost commodity prices and the strong dollar won't hurt. And despite a rebound this year, they've just emerged from a five-year bear market so there could be a lot more to come.

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Brazil looks vulnerable as optimism on regime change fades and concerns about the impact of a strong US dollar on emerging markets grows. However, Russia may continue to benefit from the oil rally, and from hopes that Donald Trump will be a sympathetic president.

The worst-performing funds are a mixed bag. Biotech looks risky with Trump's approach to US drug pricing unknown, while property's woes may have just begun. Look at UK smaller companies instead the Association of Investment Companies notes the sector has lagged since the Brexit vote, despite improving sentiment. Consider Strategic Equity Capital (LSE: SEC) Barry Norris's Argonaut Absolute Return fund (long a MoneyWeek favourite). Both have had a tough year in 2016, but can point to strong track records over five years.

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Top ten funds*Total return (31/12/15 to 14/12/16)Theme
WAY Charteris Gold & Precious Metals123.50%Gold miners
Junior Gold119.60%Gold miners
HSBC GIF Russia Equity85.60%Russia
SF Webb Capital Smaller Comp's Gold85.10%Gold miners
Smith & Williamson Global Gold & Res's82.10%Gold miners
JPM Natural Resources80.60%Miners
CF Canlife Global Resource74.40%Miners
Investec Global Gold72.80%Gold miners
HSBC GIF Brazil Equity72.70%Brazil
CF Ruffer Gold71.10%Gold miners
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Bottom ten funds*Total return (31/12/15 to 14/12/16)Theme
FP Argonaut Absolute Return-26.20%Absolute return
CF Odey Absolute Return-18.00%Absolute return
City Financial Absolute Equity-14.60%Absolute return
Old Mutual UK Opportunities-12.20%Absolute return
Invesco Korean Equity-11.40%South Korea
Franklin Diversified Growth-10.70%Absolute return
Jupiter UK Growth-9.10%UK companies
AXA Framlington Biotech-9.10%Biotech
M&G Property Portfolio Sterling-8.00%Property
FP Charteris Property-7.70%Property
John Stepek

John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.