It’s no secret that Stocks & Shares ISAs have performed considerably stronger than Cash ISAs in the recent past. In the 2014/2015 tax year the spread between these two investment vehicles was a shocking 5.9%. Clearly, investing in stocks and bonds has historically offered the investor stronger yields.
But what does the investment landscape look like right now? Where do the potential growth markets lie?
FTSE 250
While the Blue Chip shares of the FTSE 100 tend to offer safe and reliable returns, hence their prevalence in many portfolios, it is actually the FTSE 250 which has shown considerably more growth in recent years.
According to MoneyWeek, while the FTSE 100 has posted growth of almost 30% over the last five years, this is eclipsed by the 84% growth of the FTSE 250. Part of this growth seems to have come from the prevalence of property companies in the mid cap index, many of whom have profited handsomely from the recovering property market and government-promised house-building boom.
While, as any good stock broker will tell you, past results are no guarantee of future performance the evidence does suggest that casting your stockholding net rather wider has the potential to reap larger benefits.
Green Energy
As governments around the world struggle to achieve targets for the reduction of CO2 emissions they are relying ever more heavily on renewable energy sources to keep the lights on.
According to the International Energy Agency renewable energy accounted for 13.2% of global energy use in 2012. By 2013 this had grown to 22%. PWC reports that “the UK is experiencing a small scale solar revolution” with £4.7 billion of investment expected over the next two years.
There are further indicators of growth in the renewable energy market too. The Renewable Energy Association reports that jobs in the green energy sector are growing seven times faster than the national average.
It seems unlikely that the green energy market is anywhere near capacity, and as a result may represent opportunities for further growth.
Property
Its little secret that property has performed strongly as an investment over the long term. Annual house price inflation has run at 3.2% per annum since the early nineties. The average house in 1975 sold for £10,388; this year that figure is a jaw-dropping £195,279.
That said, there are risks for property investors, as many private landlords and capital gains investors found during the economic recession. It’s not necessarily just the volatility of the market that can make investing in property a challenging vehicle for your savings. A new tax-hike promised by Chancellor George Osborne also promises to make buy-to-let investments less appealing from 2017 onwards.
Fortunately investments like Wellesley & Co’s Peer-to-Peer lending terms, do much to reduce the property investor’s risk. For one, funds are secured on existing property. For another, Wellesley’s trademark “auto-matching” facility ensures that bond holders’ money is carefully diversified across their entire loanbook. Even better, Wellesley’s P2P landing platform investors can earn rates of return of up to 6.32% per annum on their capital without any of the practical hassles of property development. However, it has to be understood that P2P lending sees investor’s capital at risk and interest payments are not guaranteed if a borrower fails to meet a loan repayment.
Latin America
Investing in growth economies is really nothing new; up until recently many investors have found funds targeting South East Asia offering impressive returns. Over recent months, however, a potential sea change has begun to rear its head as China’s economy shows signs of slowing.
Interestingly, recent reports suggest that strong growth is being seen in Latin America. While there are of course risks from investing in growth markets, a number of funds investing heavily in Central and South America have posted some shocking growth in recent months.
Metals
For the truly creative investor further opportunities may lie in China’s recent economic slowdown. The stalling of this manufacturing powerhouse has meant global slumps on many commodities markets. Fortune reports that gold has dropped to a five-year low while copper’s fall has been even more precipitous.
Quite how much further such commodities will fall in value is a tricky call, and predicting when (or even if) commodity prices will rebound is even more of a gamble.
However such a fall in worldwide metal prices means that for the investor willing to shoulder a fair degree of risk, such significant under-valuing of metals may represent opportunities for those able to time the market correctly.