Mark Dampier: 'Never mind forecasts, find a good fund manager'

It's the time of the year for forecasts, such as the level at which the FTSE 100 will end the year. I used to join in this prediction malarkey and saw it as a bit of fun – but then, a number of years ago, I came very close to guessing right. As congratulatory emails poured in from clients, I came to the realisation that others took it much more seriously than I did –so I stopped doing it. The only real use of these forecasts, in my opinion, is to highlight any consensus views – and if there is a consensus, it is bound to be wrong.

Markets are a mass of human emotion, and swings in sentiment can result in huge share price fluctuations. They are therefore unpredictable. However, there are guiding rules. First, overwhelming pessimism is usually a good thing, whereas extreme optimism is not. Investors have generally been pessimistic over the past five years, yet the stock market has risen strongly. Second, market falls usually present an attractive buying opportunity.

So what is my prediction for 2016? That forecasts will prove a waste of time. In my view, that time would be better spent looking for exceptional fund managers to look after your money.

So here are a few to think about. Among investment trusts I like Murray International, which now trades at a discount partly due to its exposure to Asian equities, which have had a torrid time in recent years. With a yield of 5 per cent, I believe investors are being paid to be patient.

Another investment trust to consider is RIT Capital Partners. Although it currently trades at a slight premium, this is an excellent, all-weather multi-asset fund.

As an older investor I have a bias towards equity income funds, and excelling in this area have been CF Woodford Equity Income, Marlborough Multi Cap Income and JO Hambro UK Equity Income. These funds all invest in the UK, so for diversification I may look to include the Jupiter Asian Income fund, when it launches in a few months. It should yield around 5 per cent and will give exposure to a dynamic area. As this region has struggled over the past few years, I view it as an opportunity to gain exposure at reduced price.

My main concern for 2016 is the many thousands of people entering into drawdown pension arrangements. Those who need to take regular capital sums to meet their income requirements must ensure they have a significant cash buffer in order to avoid selling investments in a falling market, which can compound losses.

My advice for all investors this year is to be patient. Invest with your mind, not your heart. And then, once your selections are safe in the hands of a trusted manager, forget about it for a while.