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Sunday 25 September 2016

Investments that could lose you money in the new year

Published 03/01/2016 | 02:30

So which investments should you steer clear of in 2016?
So which investments should you steer clear of in 2016?

Commodities and emerging market equities were some of the worst performing investments of 2015, according to Barclays Ireland.

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So which investments should you steer clear of in 2016?

Cash and bonds

"Don't leave your money sitting in cash," said Davy's Brian O'Reilly.

"Inflation is picking up in Ireland so the value of the euro is declining.

"And don't buy long-dated bonds such as 15-year plus annuity bonds. These bonds will lose their value when interest rates are rising."

Emerging market shares

"Higher US borrowing rates will be bad news for indebted emerging market economies," said de Vere's Tom Elliott. "Not only will interest rates rise, but repayment costs in local currency terms will also go up as the dollar strengthens.

"Therefore we may well see further stock market under-performance from emerging market economies, particularly from those that rely on commodity exports for much of their foreign earnings."

Oil and gold

"The prices of key commodities such as oil and copper are close to finding a floor, but the supply picture still looks a little daunting for those eager to take a more positive view on the space," said Pat McCormack of Barclays.

"In commodities, gold remains particularly vulnerable to any US interest rate hikes."

Oil prices fell to record lows throughout the year - and are now about a third of what they were three years ago.

However, speculative investors could potentially double their money over the next two years if they invest in oil today - and the price recovers.

The price of oil was around US$37 a barrel early last week.

"Many people believe that the fair value of oil is US$60 a barrel - and most people expect it to recover to that," said Mr O'Reilly. "If oil recovered to $60 a barrel, we'd take a position on the oil majors such as Exxon and BP - these companies have good balance sheets and we expect them to be here in another 50 years."

Those considering taking a bet on oil however should steer clear of small debt-laden oil companies, particularly US fracking companies.

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