Equities, Bonds, Gilts or Cash - investment strategy to beat credit crunch

Edward_Dtrain

Hi I am 38 and have been investing in a company money purchase scheme for some time. Historically I have invested in equities. However, I am becoming increasingly nervous about the potential impact of the credit crunch on the equities market.

Can anyone offer guidance on what my be a good short term investment strategy. I.e should I transfer my funds into gilts or bonds - My scheme allows me to make these transfers free of charge.

Thanks in advance

dunstonh

It's your risk profile that decides this. No-one elses.

Asia is virtually unaffected by this credit crunch so you could increase your risk. Fixed interest is probably going to improve on recent years as interest rates head down.

That said, monthly contributions into equities allows you to average out these ups and downs. You do also have to consider that despite media coverage indicating it is the end of the world the stockmarket is only down around 10% on its high point. There is still a lot of good news out there which is offsetting the bad to some degree.

Paul_Herring

You're 38, and asking about short term strategies for a pension fund?

averageguy11

ftse only down tht much..but 250 etc down much more..wot has kept ftse afloat is its bias 2wards mining companies...tht cud change

As regards to wher u place yur cash isent tht a personal decision?

jamesd

Up to you to decide but you could consider switching some, not all, to gilts or corporate bonds. Or to Russia, Latin America and Asia-Pacific areas, but say no more than 20%, 10% if cautious into these emerging markets. Or to other non-UK better developed markets like Europe, emerging Europe, Japan and perhaps the US.

I did something a bit like this recently, switching 3/4 of my UK small cap money to UK large cap because I think that there will be more strife at the smaller end of the market and it's higher beta/volatility anyway, so not as good a place to be if you expect downward rather than upward trends. I also did what dunstonh mentioned, increasing the amount I have in Asia and other emerging markets. But I only had about 25% invested in the UK, so I was already very diversified out of UK-specific risk.

No need to jump fully out of equities when the risk is market-specific for UK, US and to a lesser degree parts of Europe. Though needs watching if there's a US depression, which could significantly affect other markets.

Perhaps switch 5% each month out while the outlook is poor, then 5% a month back when it's good.

purch

It's your risk profile that decides this. No-one elses

It's no good listening to advice if you are that nervous or worried. It's very hard, impossible in fact to know what the situation will be in 2 or 3 years time, and you don't want to be second guessing yourself, let alone second guessing other peoples opinions

World equity markets could very well be 10-15 % higher than they are now, in 18-24 months, but in the meantime they will probably drop even more

You will probably be better suited to a more diversified portfolio in the current climate with less exposure to equities, but whether that is 25%, 50% or 100% in fixed income has to be your decision

averageguy11

spot on purch