It occurs to me that this is the same thinking required to build a robust investment portfolio, with each part of the portfolio playing its role in creating a delicious outcome.
Taking these elements individually: turkey is the core of a Christmas dinner. Nothing happens without it. In investment terms, this is your basic, global stock market exposure. If you don’t have it, your savings probably won’t grow fast enough to meet your long-term goals.
Like a turkey, you need to give it some attention and pick a good one. You can pick up the cheap one at the back of the store, but you take a risk that it’s going to be a bit tasteless.
With this in mind, we’d suggest a good global fund such as the Rathbones Global Opportunities Fund or the Capital Group New Perspective Fund for the core of your portfolio.
If you like an income option, perhaps the JPM Global Equity Income or TM Redwheel Global Equity Income funds. These sit at the heart of your portfolio and are its most important element.
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Potatoes are your bond funds. They’re not going to be particularly exciting, but they provide a nice bit of balance, and if all the other elements of a portfolio go wrong, people are still fed. Plus, they’re a nice complement to all the other, more exciting, things on the plate.
I’m not going to extend the analogy to which ones are chipped, fried or sautéed, though good bond funds do come in a variety of flavours.
A strategic bond fund is your equivalent of bog-standard roast potatoes that will see you through thick and thin. They are the most flexible kind of bond fund, and good options include Invesco Tactical Bond or Jupiter Strategic Bond.
Sprouts are always a tougher sell. Their investment equivalent is probably something that you know you should have in your portfolio, but don’t really want.
At the moment, this might be emerging markets. It’s been a really tough period for the sector, with the MSCI Emerging Market Index down by an average of 1.3% over the past three years. That compares to a rise of 8.8% in the MSCI World Index.
Sprouts and emerging markets
But, like sprouts, an allocation to emerging markets may be good for you. Emerging markets tend to grow faster than their developed market equivalents.
The IMF forecasts that the world’s emerging and developing economies will grow at 4.2% in 2024 and again in 2025. This is more than double the rate of those in advanced economies (1.8% in 2024 and 2025).
They are also plugged into key areas of growth – the semiconductor supply chain, for example, decarbonisation, or reshoring. Also, they look cheap relative to developed markets and their own history.
I’m guessing that the… ahem… after-effects from an investment in emerging markets may be much more pleasant than they are for sprouts. We like M&G Global Emerging Markets and GQG Partners Emerging Markets Equity.
Yorkshire puddings with a Christmas lunch is a controversy I’m not brave enough to wade into. However, if you do like something uniquely British with your turkey, there are plenty of options. UK smaller companies have had a better year in 2024, with the average fund up 8.2%. There is still more to go for, we believe, after several difficult years for the sector. We like Unicorn UK Smaller Companies and WS Amati UK Listed Smaller Companies.
For those who prefer something a little larger (tray-baked rather than individual?), you could try a UK equity income fund, such as Rathbone Income or the ever-reliable City of London Investment Trust. For a straightforward UK equity option, we like Schroder Recovery or Liontrust Special Situations.
The final consideration is liquidity. Yes, you’ve guessed it – gravy. Holdings in cash would be the equivalent here. Just like gravy, you can have too much of it, or you’re going to ruin everything else, but it can really help bring everything together and make the whole meal easier to digest.
Your cash holdings are designed for emergencies and to take advantage of opportunities as they arise. I’m not sure how that compares to gravy, but you get the picture. In terms of how much to hold in cash, most advisers recommend at least three months’ expenses in an easy-access account, paying as high a rate of interest as possible.
There you have it – the ideal Christmas dinner mapped onto the ideal portfolio. As with your festive lunch, it’s all about balance and diversification, with all the various elements working harmoniously together. Now, if I could just bring the same discipline to my family.
Juliet Schooling Latter is research director at FundCalibre and Chelsea Financial Services
