I’m not keen on the current trend for starting sentences with ‘so’, but I’m trying to get with the pragramme. Next I’ll be saying ‘like’ 3 times per sentence.

As the title of my blog suggested, I’ve been on a real journey in terms of finance and investing. This is taking me, to date, from having a rough idea about shares, mortgages, ISAs etc, to taking my CII exams to qualify as an Independent Financial Adviser.

It’s probably therefore quite useful for me to live through a market drop while actively learning about them. Previously I’ve seen them on the news, but not taken too much notice.

Investing probably splits ‘expert’ opinion like nothing else I’ve come across. Of course of you appear on TV claiming that the market will crash/take off, you’ll be right half the time. A clocked stop is right twice a day.

I’ve listened to a lot of opinion, and tried to form my own. Even ignoring facts, figures and history, it just feels at the moment that there is likely to be another, bigger crash. Unemployment is going to go up massively, though I suspect only short term; many companies will go bust (though I expect many will just be replaced). It feels that the recent rally in stock markets is artificial.

In addition, many companies, particularly UK ones, are cutting their dividends massively in the face of huge drops in their profits. This must have an effect on their share price, which doesn’t seem to have kicked in yet. Efficient Market Hypothesis suggests that this should already be priced in to the market, however it is a theory which seems rather flawed to me (assuming that investors are rational!).

So, what to do about it? I’ve sat on my (modest) portfolio over the course of the last few months, and I’ve added to it while prices where low. However, I have moved from around 90% equities (including a REIT, which lost 80%!), 10% bonds, to 70% equities and 30% bonds. My plan is that if there is a crash, the bond funds will increase. When the market feels to be consistently going back up, I’ll move back in to equities. This is very different to moving into cash (ie selling everything), and hoping to jump back on to a rising market. Many people do this in every drop and end up selling low and buying high. if I’m wrong, I could miss out on a bit of stock market growth, but I’ll still be growing my wealth through bond funds.

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