Plunging markets? Four investments to buy in 2016

Plunging markets? Four investments to buy in 2016

Canny investors would be wise to focus on gold, gilts, stable shares and emerging markets this year. Here’s why

By Andrew Oxlade
Telegraph executive head of personal finance 7:30PM GMT 11 Mar 2016

Investors could be forgiven for heading for the hills given the tumultuous start to 2016

In this Predictions series we had warned of such turbulence. At the start of the year, John Ficenec, editor of the Questor column, warned of “another year of falls in store for the UK stock market”.

The speed at which this prediction played out was unnerving. Stock markets fell sharply in January and again in a second bout of jitters in early February. The FTSE 100 fell from 6242 at the start of the year to a low of 5537 on 11 February .

In financial storms as blustery as these, it is hard to know what to hold, or be brave and buy.

Our concern for stock markets remains unchanged but it’s also important to keep long-term savings invested somewhere given the alternative: the derisory rates offered by banks. In another of our new year Predictions reports, we urged scepticism in the face of warnings about imminent rates rises. The market forecast for the first UK Bank Rate rise has since moved to 2019.

Returns, therefore, must be found elsewhere than a savings account, but where? Allow us to offer a few suggestions for a periphery of your portfolio. We do, of course, suggest you maintain a balanced mix of investments, holding a little of everything but with stock market investments at the core, given the higher returns that equities have offered over the very long term. Beyond that, if you don’t hold the following investments, you might consider buying a little in 2016.


We have long been advocates of exposure to gold as an insurance policy. This was demonstrated once again in the recent sell-off when the price of bullion surged from $1,061 (£762) an ounce on New Year’s Day to $1,246 (£895) by early February. In times of fear, gold is in demand. The price also rises when inflation becomes a danger.
Deflation remains the bigger threat for now, which is partly why gold has been a poor investment in recent years, but the money printing excesses of central banks could yet unleash inflation. In the meantime, the gold price offers some protection during repeat episodes of buckling confidence.


Most Western governments still owe far too much money, so why would you invest in the bonds they issue? Won’t they unravel when these debt problems become unmanageable? Yes, when rates rise, bond prices will tumble but rates are unlikely to rise for many years to come. One good reason is because of those debts. The Bank of England will continue to provide the crutch of low rates that indebted governments – and individuals – still need. Gilt prices will remain supported. They also tend to rise when stock markets fall: another reason to hold a small amount in a low-cost gilt tracker fund.

Turmoil-proof shares

In difficult times, the companies that fare best are those with customers who will keep buying their goods or services regardless of what happens. Questor has suggested buying companies with “stable earnings” for 2016, including Imperial Tobacco and British American Tobacco or media companies BT or Vodafone.

You could also consider other stocks in this vein, recommended as “buy and forget” equities by fund managers in the Telegraph recently. These include Unilever and Reckitt Benckiser, which produce household goods, or drinks maker Diageo. Accounting software group Sage is another business with strong, repeat business. These stocks are not cheap but in uncertain times, you have to pay for quality.

Cheap stock markets with plenty of promise

Most of your money will sensibly be parked in the largest stock markets. But these are not cheap. In particular, the US is remarkably expensive. Emerging markets, in contrast, have been oversold. The art is to back emerging regions, via funds that are not only cheap but have the best prospects. Brazil, Mexico and other parts of South America fit the bill, as does India. Promising pockets of Asia have glowing prospects but aren’t so cheap.

With hindsight, 2016 for all its turmoil may prove to have been a good time to invest, for the canny investor.

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