Consistently successfully timing the market is very difficult to do, even visiting Fidelity investment guru Anthony Bolton agrees. Instead, he believes you have to be contrarian to be successful in the market. "Many of the best investments I've made have felt uncomfortable at the time I've made them," he said.
Bolton this year released a book, Investing against the tide, which revealed the strategy that helped him trump his rivals for more than 25 years.
Heading the Fidelity Special Situations Fund, he said he did not focus on the economic outlook. He said it would have been difficult to form a share market outlook based on an unprecedented financial crisis that was matched by unprecedented government action. Instead, he said he focused on historical cycles, market sentiment and valuations.
Explaining sentiment by way of a curve, he said that within four months the world had moved from the fear of losing money to the even bigger fear of being left behind in a stampeding herd.
Sentiment was the stock market's extra dimension, according to Bolton, and in the shorter term perception was very important. "Sentiment extremes suggest major opportunity or major risk," he said.
He said the market had moved from fear to desperation to panic, capitulation and despondency - when a lot of people sold out of the market - to depression, hope, relief and now optimism. The point of maximum financial risk, he said, was at the top of the market - during the mass sentiment of euphoria.
Now was a good time to be back in the market where a low growth, low interest rate environment was good for equities, he said. Valuations were still attractive and he said he believed British companies were now much more attractive investments than was the case in previous decades. "I think we're in a strong recovery phase," he said.
However, growth rates would differ markedly between sectors and regions, he said. He said he liked value stocks in consumer cyclicals. "They do well in the first few months of a new bull market," he said.
After that, he said he liked growth stocks - technology and financials. He said he believed investors should also be overweight in emerging economies.
