Ditch Brazil, buy Russia

825-dancers-1200 — Brazil: a great year, but the party's over

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.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

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.

Swipe to scroll horizontally

Top ten funds*	Total return (31/12/15 to 14/12/16)	Theme
WAY Charteris Gold & Precious Metals	123.50%	Gold miners
Junior Gold	119.60%	Gold miners
HSBC GIF Russia Equity	85.60%	Russia
SF Webb Capital Smaller Comp's Gold	85.10%	Gold miners
Smith & Williamson Global Gold & Res's	82.10%	Gold miners
JPM Natural Resources	80.60%	Miners
CF Canlife Global Resource	74.40%	Miners
Investec Global Gold	72.80%	Gold miners
HSBC GIF Brazil Equity	72.70%	Brazil
CF Ruffer Gold	71.10%	Gold miners

Swipe to scroll horizontally

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