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Five investment trends to expect in 2018

Emerging markets may rise in popularity, while Bitcoin and its rivals will continue to make headlines.

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The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested.

While the process of exiting the European Union will continue to dominate the headlines, there are a few other trends that will affect investors.

For example, wealth and asset managers will bring the best of fintech (financial technology) progress to their customers, using artificial intelligence to bring costs down and biometric security measures to keep customer data safe. Emerging markets may rise in popularity, while Bitcoin and its rivals will continue to make headlines.

1) Emerging markets: the return of the Brics

For the more adventurous investor, the so-called Bric countries (Brazil, Russia, India and China) may offer some opportunities. The declining inflation in these countries could result in economically advantageous policies, and economists predict strong growth.

The IMF revised its growth forecast for emerging economies for 2018 to 4.9pc, up by 0.01 of a percentage point. That’s above 4.6pc in 2017 and 4.3pc in 2016. This growth may drive more investor interest in these emerging markets.1 Investment trusts can be a good way of accessing emerging markets in a cost-effective way. F&C Investment Trust, for example, invests in a mixture of emerging markets and larger companies such as Amazon and Microsoft, which means it is diversified and offers the potential for long-term growth and income.

2) Artificial intelligence: the rise of the hybrid adviser

While there has been a rise in so-called “robo advice”, where investors’ portfolios are chosen and managed by computer algorithms, 2018 will see investment managers taking a hybrid approach of robo and real. Recent research has shown that this combination model is preferred by investors.2

With increasingly clever artificial intelligence systems handling day-to-day transactions, investors will benefit from lower charges – and there will be increased focus on this. However, there will also be a focus on the “human touch”, both in terms of how human experts can outperform the market and how real-life interaction will help investors pick the right mix of investments to meet their goals.

3) Bitcoin and cryptocurrencies: an uncertain year

It seems 2018 will either be the year bitcoin hits $10,000 or the year it tanks in value, depending on who you believe. Mike Novogratz, the Fortress Investment hedge fund manager turned cryptocurrency expert is predicting the former.3

However, others point to plans to split the current again, which may create volatility.4

The creation of bitcoin futures and derivatives next year may also cause further volatility, as investors will be able to “short” the market for the first time, betting against the price rising.5

Watch this space.

4) Alternative assets: a rise in interest

Interest in commodities, private equity, real estate and infrastructure investment is expected to rise in 2018 and beyond. New figures from PWC suggest that these assets will take a far higher amount of funds under management, rising from $10.1 trillion worldwide in 2016 to $13.9 trillion in 2020. You can make the most of the opportunities in real estate, for example, by investing in a trust such as our award-winning Commercial Property Trust6, which invests in UK commercial property with a central London bias.

Interest in infrastructure investment is expected to be particularly strong, according to the report, with new funds making it easier for individuals to access infrastructure funding.7

5) Fintech: improving your investment experience

The speed of change in fintech will change the way we invest in 2018. Expect more sophisticated chatbots to deal with your queries and forms that you can upload using your smartphone camera, as well as increased levels of biometric security to prevent you needing to remember extra passwords. Fingerprints, voice and facial recognition will also be increasingly popular ways of managing security.

Remember that stock market investments can rise and fall in value and returns are not guaranteed, which means you may get back less money than you originally invested.

If you are at all unsure about the suitability of a particular investment, you should speak to a suitably qualified financial adviser.

This article written by Rosie Murray-West was first published on the Telegraph here.

1 https://www.imf.org/en/Publications/WEO/Issues/2017/09/19/world-economic-outlook-october-2017

2 https://www.accenture.com/gb-en/insight/new-face-wealth-management

3 https://futurism.com/latest-prediction-puts-bitcoin-at-10k-by-april-2018/

4 https://seekingalpha.com/article/4117460-bitcoins-big-test-november-fork

5 https://www.ft.com/content/68f0178e-9410-11e7-a9e6-11d2f0ebb7f0

6 AJ Bell Awards 2017 – Winner Property

7 http://www.pwc.com/gx/en/asset-management/asset-management-insights/assets/awm-revolution-full-report-final.pdf

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