Afterarollercoaster decade,couldBritish sharesbeontheup?

WHAT a different world it was ten years ago! Gordon Brown was the Prime Minister, David Tennant was Doctor Who, and the most popular Christmas toy was Buzz Lightyear.

On the economic front, the world was still unwinding from the global financial crisis of 2008. The FTSE 100 index stood at 5,413 and the outlook was, frankly, gloomy.

My first investment decision of the decade was therefore to seek stronger prospects in Asia. In January 2010, somewhat daringly, I invested £3,300 in ASI Asia Pacific Equity.

Luckily for me, shares globally went on to flourish. In the UK, for example, even held back by fears over Brexit, the FTSE 100 had climbed 40 pc to 7,589 by the week before Christmas 2019.

That means £10,000 invested ten years ago in the HSBC FTSE 100 tracker fund, with dividends reinvested, is now worth some £19,928, says data from FE Trustnet.

I still have my Asian fund. It’s more than doubled to £6,634, admittedly with several bumps along the way.

HOWEVER,

I would have done better in America. Home to tech titans such as Google, U.S. shares beat every other category over the decade.

Helped latterly by President Trump’s corporate tax cuts, U.S. share prices in general rose by a mind- boggling 332 pc to November 30, 2019, figures from fund manager Fidelity show.

‘The launch of smartphones in the late 2000s allowed companies such as Uber and Airbnb to set themselves up. That’s driven much of the U. S. market performance,’ says investment director Tom Stevenson.

Normally bonds fall in value when shares do well but, unusually, last decade they also gained. Fidelity figures show riskier, high-yield bonds were the best sector, returning an average 9.45 pc annually for ten years. Government bonds made 4.32 pc a year.

Ben Yearsley, director at Shore Financial Planning, says share and bond prices have risen so far because of ultra-low interest rates. He says: ‘Everything comes back to rates. It’s the story of the decade.’

After the financial crisis in 2008, central banks cut interest rates to aid recovery.

It’s been a struggle to lift them without stock markets plunging ever since. Ten years ago, for example, the Bank of England base rate was 0.5 pc; its highest point since is today’s level of 0.75 pc.

With cash so unattractive, investors looked elsewhere for income, pushing up prices across the board except for commodities. These ran out of steam after a mainly Noughties boom.

In particular, investors favoured companies, typically well-known brands, which paid solid, predictable dividends.

Funds investing in this area soared, notably Lindsell Train’s UK and global funds, and Fundsmith Equity.

Any of this trio would get my vote for Fund of the Decade, although I confess to being biased. Lindsell Train Global Equity has been my best investment of the 2010s, turning in a startling 201 pc gain since May 2012.

Regrettably, investing in the last decade wasn’t all plain sailing. My biggest disappointment was Jupiter India. I believed the hype of Prime Minister Modi’s reforms and got in around the top of the market in July 2017.

Since then, I’ve lost a fifth of my initial £4,000 — or rather my daughter has, since the investment was held in her Junior Isa. We’re holding on, hoping for a recovery in time.

In Europe, I have happily followed fund manager Richard Pease as he moved from firm to firm, ending up at his own business, Crux.

But I wasn’t so lucky following another fund manager who set up by himself. After negligible gains, I sold out of Woodford Equity Income just weeks before the fund was suspended.

Neil Woodford wasn’t alone in suffering cashflow problems with hard-to-sell assets.

The same issue hit commercial property funds not once but twice last decade, both recently and after the Brexit referendum in 2016. Investors’ cash was frozen temporarily in several funds. We may be well into the 2020s before regulators work out how to run a fund with illiquid investments and still allow investors daily access to their money.

So what lies ahead? Experts agree that global growth cannot continue at the same clip, especially as interest rates are so low that further cuts won’t provide much stimulus.

Inevitably, those sectors which have done well may now begin to tail off.

Jason Hollands, managing director at investment platform Bestinvest, says: ‘I wouldn’t bet against technology but the U.S. has grown so much that you may need to cut back your holding to avoid being overexposed.’

He also warns that bonds are now ‘incredibly expensive’ as yields are at, or close to, negative. If yields should rise (and they can’t really fall further) investors will lose capital.

Finally, with a clear Brexit plan, UK shares could come back into fashion. Other unloved sectors, such as banks and retailers, may also be due a revival as they have been marked down so far, says Mr Hollands.