Anyone who has been following our articles
will know that we have been negative on
the UK’s economic prospects for some
time. It is now interesting to read that there
seems to be a consensus that economic
growth in the UK is going to be flat and
with the reductions in government spending
and the consumer reducing debt the short
term looks tough.
What should you do with your investment
portfolio to protect your position?
Step 1 Do something! I appreciate this advice
sounds simple but actually addressing
the issue is important. In the current climate
to leave equities to rise and fall in the
hope of a long term upward trend is going
back to the strategy of the 80’s and 90’s
when we were in a strong bull phase.
Step 2 Understand the 5 main asset classes
where your money is invested (cash, bonds,
equities, property and commodities [ inc
currency]). Where are these assets in their
growth cycle? How are they expected to
perform in poor economic conditions?
Step 3 What level of risk are you prepared
to take? If your capital reduces can your
portfolio still meet the outcomes required?
Step 4 Take a view on the markets and
global economic position. Is the risk of
staying invested greater than the probability
of markets moving up?
Since the start of the credit crunch in 2007
the world has changed and this has caused a
fundamental review of how investment
portfolios are managed. During the period
from 1974 to 2000 we had a strong equity
market and it confirmed the theory that equities
always trend upwards over time. The
period from 2000 to present proves this is
not always the case. In 2000 the FTSE 100
index traded at 7000: at the time of writing
it trades at 5250. We are in a new normal
and it’s time to take action.

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