Making money: investing under Labour

Labour question

“I don’t think many people in Britain have really considered what life might be like under a Marxist chancellor,” observed Mark Dampier of wealth manager Hargreaves Lansdown last week. But with Labour rising in the polls, and renewing its commitment to radical policies including renationalisation, it’s a question that investors need to address, said Ian Cowie in The Sunday Times. How should you shore up your portfolio to cope with “the possibility of Jeremy Corbyn becoming PM and, perhaps more importantly, John Mcdonnell grasping Britain’s purse strings”?

Spread the risk

The first rule, according to Cowie, is to “vote locally but invest globally”. Online investment platforms have made it much easier to spread life savings over “dozens of different companies, sectors and countries”, thereby spreading your risk. And pooled funds – including unit and investment trusts and exchange-traded funds – offer convenient, cheap ways “to put this idea into practice”. More than two-thirds of his life savings are now invested overseas, “almost entirely immune to whatever self-inflicted wounds British voters might dream up next”. Sadly, property investors may not have the same opportunity to escape, said Sam Meadows in The Daily Telegraph. Buy-to-let landlords, already whacked by the loss of mortgage tax relief and a stamp duty surcharge on “additional properties”, now face “the spectre” of Labour’s proposals to introduce government rent controls.

Inflation elation?

Still, it’s not all doom and gloom. As Tom Stevenson of Fidelity points out, stock markets have historically “often done well under Labour”. Indeed, Jim Callaghan’s time at No. 10 from 1976 to 1979 coincided with annualised returns for shares of just under 24%, and a total return of 93% – though this was when inflation was well into double digits. In the inflationary 1970s, UK equity funds run by Artemis and Invesco Perpetual did well, notes independent financial adviser Alan Steel. Were Labour to prove as inflationary next time around, similar rules might apply. Then again, many funds these days have a lot of utilities among their holdings. And these look like being “hammered”. For a more defensive approach, try something like Troy Asset Management’s Trojan Fund, “which holds a lot of gold”.