In these unprecedented times, Central Banks continue to throw money at economies, resulting in ultra-low interest rates and meagre returns for anyone holding cash on deposit. With headline inflation c 0.7% (CPI) in the UK, many investors are faced with the conundrum of how to produce positive returns on their investments without taking too much risk. Sadly, there is no easy answer, with bond yields at all-time lows and risk inherent in commercial property, equities appear to be the only solution.
Of course, investing in equities is not a free lunch, with all the inherent risk and volatility as occurred in the brutal sell-off seen in 2020. However, equity markets quickly recovered and in many global markets have reached all-time highs. We at Baggette Asset Management Limited (‘BAM’) believe equities are the asset of choice over the medium to long term, with good quality companies providing the ability for your cash to outperform inflation. Analysts’ consensus forecasts dividends from the top 100 UK companies to be 3.77% for 2021. Not all equities will be winners and we feel that active managers (stock pickers rather than index trackers) will provide the best opportunity for growth.
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