Sector Investment in the UK: Risks and Possibilities

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While the idea of investing across the market to minimize one’s potential losses may seem like a reasonable, low-risk approach, there is another school of thought, claiming it to be too conservative and low-income. If you have strong ideas concerning the prospects of this or that industry over some period of time in the future, you may find the concept of sector investment to be more attractive. The idea is to concentrate on the areas of the economy you believe are currently undervalued or face the prospects of strong growth in the near future.

Ideally, this approach helps you control your risks by channeling your money to the areas with better prospects. However, if you make the wrong choices, you risk putting your money into poorly performing areas and not only fail to increase your investment funds but lose money as well. Nevertheless, it all depends on what share of your investment portfolio you dedicate to this approach. Most experts suggest that if you want to err on the side of caution, you should limit your sector-specific investments to 10 percent of your total investment funds, with more risk-prone investors putting the limit at 40 percent, but not higher. Such division allows for good income in case you manage to predict the growth of this or that sector successfully and limits your losses in case you make poor decisions.

So, what sectors seem to be a good investment choice in the UK in the foreseeable future? Let’s take a look.

Manufacturing

In general, British manufacturing sector today is at a low ebb, mostly due to Brexit uncertainties and fears. Notable exceptions are the industries related to housing and institutional construction (such as iron fences and gates manufacturing) that face a noticeable rise as a result of numerous new projects in this sphere. However, it should be noted that the reason for the slowdown in growth in development is exactly uncertainty rather than the lack of ambition. The British economy has been traditionally dominated by production and manufacturing for a long time, and it is likely that as uncertainties are left in the past, the sector, in general, will see improvements as well.

Software and Tech

Although Great Britain isn’t what you immediately think about when you speak about software and tech, this impression is deceptive. The UK ranks third in the world behind the United States and China for total capital invested in digital tech companies, and London is generally considered to be the third most important center for tech startups behind the Silicon Valley and New York. Although the UK isn’t associated with such giants as Google or Apple, its strength lies in numerous smaller yet quickly developing companies that occupy a leading position in narrower niches globally.

A good example is Craneware, a healthcare software company that currently supplies its products to almost a third of registered American hospitals. If you take a closer look at some other niches, you will find a number of British companies holding similar positions. Perhaps it is less glamorous than being a new Google or Amazon, but it still offers excellent returns to investors.

Banks and Financial Institutions

Banks and financials have been underperforming for over a decade due to the financial crisis, but it seems that they are finally firmly on the road to recovery. Better capitalization levels, rising interest rate environment and growing concentration on improving their core businesses mean healthier overall conditions for such organizations, which in turn leads to the dividends again flowing back into the hands of shareholders. However, one has to take it into account that if Brexit significantly hurts the British economy, it cannot but take its toll on the banking sector as well.

Mobility Technology

According to the UN’s predictions, about 60 percent of the world’s population will live in cities by 2030s. This means that the population of cities and towns is going to increase and cities and towns themselves are going to grow as well, which cannot but create new demands on their infrastructure. The issues of such rapid urbanization cannot be solved by evolutionary measures – only significant breakthroughs can address problems like traffic congestions and increasing travel times, especially if preservation of the environment is taken as a necessary factor. It seems that whoever invests into startups developing different types of mobility technology (electric vehicles, connected vehicles, autonomous systems, alternative transportation methods and so on) is going to see impressive returns later on.

Language Services Industry

Another interesting yet less orthodox area for investment is language services and translation. As more and more businesses expand globally, they need urgent and precise translation services to accompany them. This leads to the growing demand for language specialists as well as developments in machine translation.

Although it is up to you to decide where you are going to put your money, all these seem to be viable directions to work in.