Investing: what's hot and what's not for 2013

Stock market graphWhen it comes to successful investing, timing is everything. And while no-one can accurately predict the markets all the time, industry insiders should certainly have a better idea than the rest of us.

We asked some of the UK's top fund managers, analysts and investment advisers to give us their top five tips for the next 12 months.
1. Global equity income funds
With government bonds, or gilts, in the doldrums, income investors need a new strategy.

Fortunately, the dividends available from a growing number of companies are becoming more generous and could therefore fill the gap.

Bill Mott at investment manager Psigma said: "Multinational companies such as Vodafone and GlaxoSmithKline are currently paying a dividend yield that is more than twice that available on UK government bonds."

Income investors who have always stuck to UK income funds are also being urged to branch out on to the international stage.

Darius McDermott, managing director of Chelsea Financial Services, said: "Given the huge amount of money already in UK equities, I'd again say global dividend funds are worth a look to add an extra level of diversification."

He therefore recommends the M&G Global Dividend and Newton Global Higher Income funds for 2013.

2. Emerging markets
Research from the Association of Investment Companies (AIC) suggests that a quarter of fund managers expect emerging markets to outperform in 2013. That is not to say that the returns on offer will be steady, though.

Dr. Slim Feriani, who manages the Advance Frontiers and Advance Developing Markets schemes, said: "While emerging market fundamentals on the whole remain good, it is difficult to predict the path that emerging markets will follow."

The huge majority of investors will therefore be better off with an emerging markets fund such as Invesco Perpetual Hong Kong & China or Jupiter India - rather than trying to invest in individual stocks.

3. Gold and natural resources
The prospect of further quantitive easing (QE) has boosted the price of gold in recent months and the US government's plans to stimulate the economy across the pond could prompt further price hikes.

Ways to benefit from an increase in the gold price include buying gold itself and investing in a gold fund.

Patrick Connolly of AWD Chase de Vere recommends the BlackRock Gold & General fund or JPM Natural Resources for more diversified exposure to the natural resources sector.

4. VCTs
From 2014-2015, tax relief will only apply to pension savings of up to £40,000 a year and £1.25 million over a lifetime.

This has prompted renewed interest in tax-efficient venture capital trusts (VCTs), the advantages of which include 30% upfront income tax relief and tax-free capital growth and dividends.

Paul Latham, managing director at Octopus Investments, said: "We see VCTs as the simplest and most effective way for people to build up an alternative savings pot in a tax-efficient manner."

5. Smaller companies
The AIC figures show that blue chip companies have fallen out of favour with fund managers, many of whom backed large stocks this time last year.

Just 4% of the managers who responded to its survey said that they expected blue chips to outperform smaller and mid-size companies in 2013.

To access companies of this kind, Connolly recommends the BlackRock UK Special Situations fund, which is at least 60% invested in mid and small-cap stocks.
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