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Do I detect a note of hope in the air or is it just a hint of Spring on the horizon? Whatever it is, I’m having a record number of clients enquiring about ISAs and pensions. A few years ago, nobody wanted to know about investment – or at least investment that didn’t consist of bricks and mortar. Now, with the FTSE back at levels last seen in 2000, people are more ready to take the plunge again. Not that there aren’t problems on the horizon. The cold winter has shown us once again how dependent we are on fossil fuels. . . . .and also on Russia to supply us with oil and gas. While analysts say that the price of oil will stabilise, common sense says that, with increasing demand from India and China as well as the West, the oil crisis is not going to get any better. That represents a major danger to the world economy. When will the Americans learn to love hybrid cars and get rid of their gas-guzzling SUVs?
And, talking of the Americans, it’s not just their energy consumption that causes problems. There’s the deficit as well. This is now getting totally out of control and George Bush doesn’t seem at all concerned about it. The USA is in hock to the Chinese and he should be worried about that. What’s more, Americans save even less than we do. They feel they don’t need to because property prices are rising and so the average household feels rich. If there’s a crash in the US property market, all hell will break loose. And when the American economy sneezes, world stockmarkets catch a terrible cold.
But of course, a cold is one thing – avian flu is quite another. I hate to sound so gloomy but, if the threatened pandemic does happen, the world economy might go into freefall. And you needn’t think that buying shares in Roche is going to make up the shortfall either.
But, while I think that caution is called for this year, it isn’t all doom and gloom. It’s likely that the global economy will just go chugging on – possibly with lower (but still perfectly respectable) returns than in the past few years. The important thing for investors is to make sure that you spread your risk by having a balanced portfolio. The cardinal rule is not to put all your eggs in one basket. The ideal mix of investments includes cash, property, bonds and equities – the proportions will depend on your individual approach to risk and your individual objectives, as well as the timescale involved.
Always seek proper independent investment advice from advisers who understand the market and are not just jumping on every fashionable bandwagon. You can’t go wrong with a properly balanced and diversified portfolio, as long as you review it regularly.
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