Assuming the shit really does hit the UK fan over the next year or two, what's the best defensive asset mix to aim for now. I've been pulling out of equities and funds for some time but just sitting on a cash pile doesn't feel very productive. I'd still like to be free enough though to take quick advantage of lows if the forecast 5200-5300 market materialises in the future.
-neil f.
1) Put the money in a good savings account 2) Forget about it 3) Devote your time and brain to something more useful
Matti
If you invest in companies that pay good and regularly increasing dividends, you will probably find that the income from them will continue, and will increase over time. This happened through the 1974 crash, and the 2000-2003 correction. Reinvested accumulating dividends in similar companies will compound that increase.
What's more, you will probably come out at the other side with your capital enhanced.
Cash - spread amoungst a number of safe institutions.
You've missed the boat on gold and other commodities, I believe.
You need to be aware of the Financial Services Compensation Scheme limits and use government backed vehicles such as National Savings.
Beware of money market funds, as the extent of their exposure to higher risk investments is unclear.
I normally follow a value (of which high yield is a subset) investment strategy, similar I believe, to Terry, but I've taken the opposite view and am 90% cash. The spectre of the largest credit bubble in history and rising interest rates does not a sane investment environment make. I'll review when the delayed effect of the interest rate rises has been fully factored into the economy and into people's mindsets in ~12 months time. It's that old risk vs. reward thing; I believe that the risks of price declines makes equities (and property for that matter) poor value for money at current prices in comparison to cash.
Disclaimer: I was influenced by that infamous profit of doom Robert Beckman during the 90's, partly missing out on some good gains !
Interesting times....
Daytona
A big problem for many people is that it is difficult to liquidate assets when you have them in PEPs and Share ISA's. Apart from Gilts and PIB's what cash safe items can be held in them? I put some into PIBs early this year. With interest rates having since risen I am showing a loss of about 8% on them. Derek.
Why is it difficult to liquidate assets? I know that property funds are currently difficult, but that is a situation peculiar to open-ended funds. You can sell shares or fixed interest securities at the click of a mouse button, or by a single phone call. Likewise with many funds.
Yes, interest rates in PEPs and ISAs are generally poor, but that is to discourage you from holding cash in them. A gilt with more than 5 years to run and standing below par value is a better substitute. Your PIBs will rise in value as interest rates fall. The real problem arises with an ISA which is run by a fund manager, who has no real means to hold cash, and whose cash fund is not eligible for a share ISA. The answer is to transfer to a self-select ISA with low charges.
Terry's answered your question on cash, but in any case havent the rules changed allowing cash as long as you plan to invest at some point in the future ? afaic quibbling about interest rate is not what the current investment environment is about - safety before profit.
PIBS are absolutely not safe investments. See -
Daytona
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