The Magical World of Derren Brown.

Five great technical revolutions have defined the progress of mankind… The Stone Age…The Bronze Age…The Iron Age…The Industrial Revolution…The Information Revolution. Now Robotics and Artificial Intelligence will become the sixth revolution to take mankind forward. Perhaps this era would be bettered named the Age of Magic.

We may not understand how Derren Brown appears to be able to levitate and walk on water, but we do know that it is achieved by misinformation and trickery and so we can rest easy. This is not the case with the advances in technology, such as medicine, robotics, nano and artificial intelligence sciences. As these become increasingly more complex, they are rapidly becoming more akin to magic for the bulk of the population. Technology is developing faster than education can instruct. Those that can keep up, the whizz kids of today such as Zuckerberg and the like, will become the controlling wizards of tomorrow.

Twelve months ago I wrote an article saying that technology funds invested in companies immersed in the Information Revolution should still be a good source for capital growth. Most of these funds carried Google, Apple, Microsoft, FaceBook, Cisco, Alibaba and Amazon in their portfolios, all the well known companies from this era. The concern was that these have massively high valuations and there is always the possibility of an imminent correction around the corner. They are also mainly dollar denominated, and any movement in the relationship between the dollar and sterling produced instant change for sterling based investors. Nevertheless these funds have still produced great returns.

Polar Capital Technology up 53% in the last twelve months….Scottish Mortgage Trust 45%

Henderson Global Technology 40%….L&G Global Technology 36%…AXA Framlington Global Technology 36%.

I have been struggling to find those companies and funds that are immersed in the “magic” technologies of the future. It turns out however, that many of these businesses are getting their development and expansion money by giving up equity to the likes of FaceBook, Amazon and Microsoft. So by default I am already invested in the “magic” via the technology funds I already hold. Maybe this new equity ownership alone will be sufficient to fight off the argument of over evaluation and bubbles in these older established businesses. If there is any truth in that, then maybe the technology funds above will not run out of steam and will continue to deliver the goods.

In the meantime it appears that Polar Capital is launching a unit trust that is going to hit the sweet spot. It is going to be called Polar Capital Automation and Artificial Intelligence Fund and its aim is to hold forty to fifty businesses all directly working in Derren Brown`s world of magic. That is one for me to hold!

Investing does not always have to be a case of controlling spinning plates.

When my grandson was born my wife`s mother invested a £1000 for him. This was placed with Invesco Perpetual in a Managed Fund. Sixteen years later following the introduction of Junior ISAs we were able to transfer the grand sum of £1950 into one of these. This represented a pathetic growth of 95%.

Now my grandson is mathematically skilled and well able to understand the vagaries of currency, stock-market and fund movements. He is also of an age where a bit of excitement does not go amiss. Between us we agreed that as D.C.I Hunt would have said “Now was the time to fire up the Quattro”. Two years later his portfolio stands at £3050 a growth of 56%. Keep that up for another ten years and he has £30,000 towards a deposit on a house.  So what rules did we lay down for our investment strategy?

-We would use only the weekly numbers and statistics published by The Saltydog Investor.

-We would not be swayed by the opinions of financial pundits, thereby avoiding being shipwrecked in an ocean of information.

-We would only be invested in a few funds which were all in growth I.A .sectors, and if such a sector did not exist at the time we would be in cash. That made for a very simple all or nothing pie-chart.

-The key point of this approach was for him to understand that it would be essential to be an active investor on a weekly basis when necessary.

So far this approach has been successful, but it is definitely not for the shy or those close to retirement. The last two years has seen him invested at different times in basically four sectors, Technology, China, UK Smaller companies and Japan. Currently technology funds such as Scottish Mortgage Trust, Polar Capital Technology, L&G Global Technology and AXA Framlington Global Technology have been carrying him forward.

There is no doubt that a good run of momentum feels amazingly good, and really can undo the knots in your rope. It is however inevitable that you will lose sometimes. The trick is not to make a habit of it!