PRUDENT INVESTOR: I took a 5.5% October haircut — but it could have been far worse

The early autumn stock market storms seem to have abated for now — but how much damage has been done?

Few of us have the time to keep up with every investment on a daily basis, but periodic checks can give us a good idea of the direction things are heading.

The last time I reported on all of my investments for this column was in mid-July.

Compared with then, the FTSE 100 index of shares in our biggest companies is down almost 7 per cent; the MSCI Emerging Markets index is down nearly 8 per cent.

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So which funds weathered the storm best? Newton Global Income increased by 0.5 per cent over the four months. 

This fund has almost half its money in the U.S and about a fifth in the UK. I feel that its focus on solid businesses makes it a decent home in volatile times for my money.

Lindsell Train Global Equity, which has around a third of its money in the U.S., a third in the UK and a fifth in Japan, lost 1.3 per cent since July, though it had a tough October.

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Take a look at the fund analyst company Morningstar description of the fund and the clue is there. Almost half the fund is in shares that are regarded as ‘consumer defensive’ ones.

LF Odey Opus lost 1.8 per cent. It’s main holding is Sky, making up almost 10 per cent. This is what is known as a conviction fund, where the manager may pick out-of-favour but strong companies.

Another fund which held up well was Fundsmith Equity, which is 2.4 per cent lower than in July. Analyst Morningstar describes this as ‘one of the strongest options for investors seeking exposure to high-quality global equities’.

With two-thirds of its money in the U.S. and a fifth in the UK, the biggest holdings include PayPal Holdings, Amadeus IT, Microsoft and Facebook.

If everything in your portfolio is doing well, then you should be worried because it suggests all your investments are concentrated in one area  Mark Dampier, Hargreaves Lansdown 

There’s one other point worth highlighting. The FTSE 100 index of shares in our biggest companies only finished October 5.1 per cent lower than it started.

But the biggest individual loser that month, Royal Mail, fell 24.8 per cent after a profits warning.

This highlights how much riskier it can be to hold individual shares than investment funds which hold a mix of shares.

Even with their higher costs, for most amateur investors like me they are a wise option.

But, above all, the key to weathering any storm is balance.

As Dampier says: ‘If everything in your portfolio is doing well, then you should be worried because it suggests all your investments are concentrated in one area.’

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