Thursday, November 20th, 2008

Hold Cash to Protect Yourself from FTSE Freefall

Sep 2nd, 2008 | By Ben Traynor | Category: International Investing

Fleet Street Daily editor Ben Traynor says more and more analysts are predicting a “calamitous” breach of 5000 for Britain’s FTSE100 benchmark index. Ben says the stock market slump means it is a good time to increase your holdings of cash

Today we’re tackling perhaps the most fundamental question in investment. What’s going to happen next?

I could embark on a truistic homily about how it’s not given to man to know his fate… how we must play the hand we’re dealt… or something along those lines.

But you already know all that. So… what do we think will happen next?

I cornered Theo Casey, The Fleet Street Letter’s investment director, and asked him a monster question.

What will be the next big move for the stock market? “Well,” he answered, in his typically cautious, investorish manner. “I wouldn’t want to pin my eyeballs to this… but a fall below 5,000 is a real possibility.”

The FTSE 100 is, at the time of writing, at 5,628. A fall below 5,000 would be calamitous.

“Of course,” adds Theo, “I do hope I’m wrong. But I’m preparing in case I’m right.”

Theo’s not alone in this view. Several prominent analysts have expressed similar concerns. It raises the obvious question - is there anything we can do about this?

Well, there is one obvious answer - one that tends to get forgotten. You can simply hold cash. I’ve already told readers of The Fleet Street Letter that there is nothing wrong, at times like this, in holding more cash than you’re used to.

That may not be terribly exciting advice. But, to me, it makes sense.

“But you don’t have to completely cash out,” adds Theo. “There is a way you can prepare. However, I fear many investors will do the one thing they shouldn’t, mistakenly believing it’s the best way to minimize risk.”

Read on to discover what investors should - and shouldn’t - do to prepare their portfolios

Source: How You Should (and shouldn’t) Prepare for a FTSE Nosedive


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By Ben Traynor

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Ben Traynor is a contributor to Fleet Street Daily of Fleet Street Publications.

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Fleet Street Daily

The financial markets are currently going through their most turbulent period in years. The credit crunch continues to bite… the dollar is collapsing (and taking the pound down with it)… and a UK recession seems an inevitability. Commodities prices are going haywire… Asia's on the rise... there's a lot for investors to keep on top of! And it's changing every day! That's where the Fleet Street Daily comes in. A brand new, 100% FREE service that keeps you plugged into the financial stories that really matter.

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