Party like it's 1989? This portfolio looks set to avoid any hangover.
Remember 1989? It was a time when:
* the FTSE was awash with 'leveraged buy-out' activity;
* property prices were sky high and;
* there was a stock-market bubble in Japan.
Roll on 18 years and 2007 is a time when:
* the FTSE is awash with private-equity bid activity;
* property prices are sky high and;
* there is a stock-market bubble in China.
Sure, they say stock-market history never repeats itself. But rename 'leveraged buy-out' with 'private equity' and swap one rampant Far Eastern market for another and the similarities between 1989 and 2007 seem clear to me.
But why is this important? Well in 1990, the buy-outs unravelled, house prices slumped, Japanese shares collapsed -- and the FTSE All-Share fell 14%. Could 2008 witness a similar downturn? Maybe.
Overheated markets
If you're worried about overheated markets, you might want to know about an investment trust that already seems prepared for a downturn. I recommended this trust for the Motley Fool's Champion Shares service in February.
At the moment, the trust in question is essentially a portfolio split fifty-fifty between some blue-chip shares and cash. Although the cautious strategy has caused the trust's share price to lag the All-Share index during the past few years, I'm confident the defensive approach will limit any downside if/when the market takes a turn for the worse.
Importantly for me, the shares this trust owns are mostly FTSE mega-caps such as BP
(LSE: BP)
, Royal Bank of Scotland
(LSE: RBS)
and BT
(LSE: BT.A)
. Collectively, I think these lower-P/E, decent yielding stalwarts are as good a blue-chip bet as any at present. Another plus point is the trust's annual dividend, which has been raised every year since the current management joined in 1990.
What now?
Though I cannot offer any guarantee, I feel this investment trust has a good chance of delivering a superior return over time. Of course I could be wrong and, as with any stock-market investment, it could end up losing you money.
Once you've joined the Champion Shares community through this 30-day free trial, you can learn more about this investment trust -- and all my other share tips. Just click on the 'Recommendations' tab on the Champion Shares website to discover their identities. The 30-day free trial also provides full access to numerous other share ideas.
Risk Warning
You run the risk of losing money when investing in shares. Prices may change quickly, they may go down as well as up and you may not get back the full amount invested. You should not invest using money you cannot afford to lose. We have taken all reasonable care to ensure that all statements of fact and opinion contained in this publication are fair and accurate in all material aspects. Investors should seek appropriate professional advice from their stockbroker or other adviser if any points are unclear. Champion Shares gives general advice only, and the investments mentioned may not necessarily be suitable for any individual.
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