Investment Advice Berkshire – Not If but When …

Investment Advice Berkshire – Not If but When …

Our sources indicate that there will be a big stock market correction. If you have investment portfolios such as ISA’s, unit trusts or pensions – then you should have benefited from a big increase in values. Be warned those increases could dissipate very quickly when the market plummets.

What makes us believe that this is going to happen sooner, rather than later …

What our research has uncovered, is information from a wide range of authoritative sources that indicate that not only is the stock market is irrationally high  but that there are other factors involved that could bring the market crashing down.

On stock market valuations, we have mentioned in a previous blog about the relevance of the CAPE ratio and that the US market is now on a CAPE of 27, whilst its average is 17, is this high ratio really sustainable?

Other stock markets around the globe are also at relative highs.

Investors have taken on risk assets in order to avoid low interest rates, but also professional investors have been piling in but they aren’t using their money, their borrowing on margin, there has been a big leap with margin investing.

The professionals know that they are exposed but just want that little more out of this already unstable market, when the downturn occurs, they will be first out. They have to be as otherwise the will face huge losses.

Will normal retail investors be as quick to offload their investments, probably not.

We are in an investment bubble.

Of course, it is only natural, that when your investment or pension portfolios have seen a large increase – you want more of the same – so it is difficult to let go …

But let go, you must, if you want to preserve your capital.

Our experiences of previous stock market collapses, is that the investment markets always give an indication, shortly before the big market collapse, of what is about to occur. In the last crash, after Lehman Brothers went bust, there was an unnatural calm for around ten days, then all financial hell broke out.

So, watch out for a warning shot with the investment markets.

For normal retail investors, life intrudes, holidays and family comes first, it is easy to get distracted, not too pay full attention, and then it may happen with speed.

The present profits on valuations may seem a distant memory…

Chartist information (indication of market trends by price movements), indicate that the investment markets are in down trend – they recommend 20% investments in equities, 80% cash.

Also the high debt levels of the Chinese financial market may leave that economy no where to turn, other than a big devaluation of their currency. The last time that happened, the US stock market dropped by 20%.

Could this be the catalyst that tips the market.

What we know, is that investments go up and investments go down – it’s the timing that’s an issue …

We are not psychic but it would seem sensible to be more cautious in an over-heated investment market. How do you take care of your money, you might consider taking a shorter term view, that means increasing the amount of low risk assets compared to equities.

What we always recommend is that you take advice from your trusted adviser.  If you would like a second opinion do CONTACT US.

Ray Best is a resilient Financial Planner with a unique approach to investment planning, his work ethic has propelled him from humble beginnings to be voted as a top UK Financial Planner by Vouched For (as published in the Sunday Times). These days he works with families with large investment portfolios or big inheritance tax liabilities, the first step, is to book a Discovery Meeting HERE.

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