Note: This article on recession preparation has been updated in light of the COVID-19 virus pandemic.
The coronavirus is upon the West. Stock markets are in free-fall.
Almost all measures that can slow the virus down and save lives will hit economic activity.
This challenge could persist until we see a vaccine or until as a species we develop some resistance to the virus.
I don’t say a recession is a certainty. Nobody can. Central banks are taking extraordinary measures, and politicians are belatedly following. Perhaps – cross everything – the virus threat will abate as the weather warms up in Europe.
But it seems beyond doubt that the hospitality sector – pubs, restaurants, event companies, hotels, and many more – are going to be hit for six by any lockdown.
And this will have knock-on consequences throughout the economy.
Winter is coming
Unfortunately, things could get a loss worse.
The latest figures from China show how its measures crushed economic growth.
China’s disruption happened at a time when the rest of the world was pretty much untouched by the virus. Major economies like the US, Germany, and Japan were bouncing back from the US-China trade war. Britain had its Brexit folly, but that had already slowed us and negotiations seemed likely to drag on indefinitely so it wasn’t an immediate threat.
Today things are very different. Workers in countries everywhere are downing tools and staying indoors. Videoconferencing suppliers may be booming – Netflix shares rallied in the early weeks of the crash as a stay-at-home trade – but airlines and cruise operators will probably go under without state bailouts.
On balance I think some sort of sharp slowdown is very likely. At the least a technical recession seems probable1. But we can’t rule out something much worse.
At the least: The range of potential outcomes has increased, and greater uncertainty means greater risk.
Things may well turn out to be less bleak than feared – especially as there’s enough fear around at the moment to push even the sunniest disposition towards catastrophic thinking. Maybe the market is overreacting.
But when the potential downsides have magnified, then I believe it’s only logical to get more defensive with your personal finances – and perhaps with your investments – until we have a clearer sense of what’s going on.
And hey – there’s very rarely a personal disadvantage to saving more money.
How to prepare for a recession
Most of us have lived through one or more recessions. How they affect you really depends on the severity of the recession, and your circumstances at the time.
- Someone who keeps their job and sees their mortgage costs fall might not even notice.
- Somebody who has overstretched themselves financially, loses work, and has nothing to fall back on could be scarred for life.
We have a safety net in the UK. Our taxes fund a decent welfare system and a free-to-use health service, so we see fewer of those middle-class to middle-of-the-highway stories you read about in the US.
But there are less dramatic ways to suffer from a recession – especially if you’ve got dependents – and they’re all best avoided.
How? Act early, reduce risk, shore up your position, and revisit every expense.
Act early
Get started with this before a recession is obviously upon us.
Some will say this is scaremongering, or that if everyone acts this way then we’ll talk ourselves into a recession.
I say: Not my problem!
Just as I thought the bank runs of 2008 were perfectly rational, I’m not interested in whistling past a potential graveyard in order to take one for the team.
Besides only a tiny minority of the UK population reads Monevator.
Inexplicable I know, but our readers are unlikely to trigger financial Armageddon on their own.
Reduce risk
It’s not the pension portfolio that you don’t need to touch for 30 years that kills you in a recession.
It’s that you stretched to borrow for a second car, or a financially shaky buy-to-let, or a dubious business venture that goes wrong. It’s the personal loan you never paid off.
“It’s only when the tide goes out that you learn who has been swimming naked,” says Warren Buffett, gazillionaire.
Make sure you’re covered.
Shore up your position
What do you take for granted now that could look precarious a year into a deep recession?
Your job? Those tenants who are always two weeks late with the rent? Your depleted emergency fund?
Think doubly hard if you’re a small business owner or contractor.
To mix my metaphors – show some love to your golden geese, and throw out any rotten apples.
Revisit every expense
Zero-based budgeting is all the rage in boardrooms. It entails going through every expense a company has at the start of each period, and justifying its continued existence.
Just like companies acquire bloated payrolls or costly perks in the good times, so our own household finances might be carrying a lot hangers-on – from a rarely-used gym membership to £100 a month you’ve been subbing to your eldest son for beer money at Uni without telling your partner.
Purge! Purge it all!
Some ideas to get you started
This kind of household right-sizing is obviously down to you as an individual. You know how much you earn, what you’ve got invested, where you’re wasting money, and what you can’t do without.
You need to work out what matters most to you.
Here’s some ideas to get you thinking.
Act early
- Take responsibility.
- Set aside a weekend to do a statement of affairs. Are you solvent?
- Many people find creating a budget is helpful to learn where their money is really going.
- Begin a conversation with your partner. You don’t want to shock them in six months when that cottage in Devon is, um, sold.
- If you have a financial advisor you trust, now might be a good time to visit them.
- Back up your earnings. Consider looking for additional work, ideally separate to your main employer. Even just a couple of evenings a week. If you’re made of fancier stuff, could you add some consultancy or similar to your roster?
- If your employer says they may need to let people go if things don’t get better, quietly consider yourself fired TODAY and go into survival mode with respect to budgeting and saving. Better sooner than later. (Perhaps look for a new job, depending on your circumstances. But certainly save all you can).
- Be prepared. Will you be offered a redundancy package? What happened at your company in the last recession? What are your rights?
- Read your contract.
- Run your own business? You’ve got to balance taking evasive action now (and doing the sort of things I’m discussing here on steroids) with potentially missing out if things turn out alright yet you’ve reduced your capacity too severely. Still, the first cut is often the cheapest.
Reduce risk
- Get out of debt.
- Seriously – if you’ve got anything but mortgage debt, then start figuring a way to pay it off as your top priority. Work evenings. Sell furniture. Eat healthy and ultra-cheap.
- Repair or enhance your emergency fund.
- Reevaluate your racier investments. Thinking of getting into buy-to-let? Perhaps give it six months. Own five flats already? Maybe sell the weakest one. Can you really risk owning that quarter-paid-for holiday home? (Perhaps – as I say this isn’t one-size fits all. My point is you should look objectively at your situation).
- If you’re a passive investor, make sure your asset allocation is good for all-weathers. Don’t be reactive, but if you were cutting corners with diversification in the first place for no good reason, it’s time to get sensible.
- If you’re an active investor, make sure you’re not invested in crazy blue sky story stocks at the expense of sensible investing. Now is probably not be the best time for ‘fun punts’.
- Are you over-invested in equities? Shares are jolly when the market is going up. Not so much if they halve. If you’re on track to hit your number at a lower level of risk, why are you taking on more?
- Make sure any essential insurance – vehicle, home insurance, life insurance if you have dependents – is in place.
- Consider additional insurance if you’re very concerned, but do your research and get advice if required. (Insurance to cover vital payments or potential redundancy sounds great, but not if it costs you a fortune, impoverishes you, and doesn’t pay out when you need it. I’m no expert on this, but the advice is out there).
- Peer-to-peer lending could be tested in a downturn, especially the more exotic offerings. Don’t be greedy. Our longstanding suggestion is 1-5% max of your wealth – in total – across the strongest of these platforms.
- Favour liquidity. Remember cash is king in bad times, and triply so if you lose your job.
- Personally I’d consider holding on to cash rather than making over-payments on a mortgage at today’s low rates if you’re short of non-property assets. Again, cash is king – provided you can trust yourself not to spend it. Ideally you’d do this with an offset mortgage. But even keeping an extra £5,000 to £20,000 in a current account that pays a percent or two of interest – rather than overpaying your mortgage, and hence locking up your money – will give you more flexibility.
Shore up your position
- If you’re like most people, your salary is your most precious income stream. Look after it!
- Try to be a profit center, not a cost to carry.
- Use the same techniques you’d apply to getting a raise to make yourself less dispensable in a downturn.
- Do all this before anyone else is thinking about it.
- If you’re a freelance or a contractor, you could be culled first. At the least be likeable, dependable, and add value.
- Get more clients.
- Get new clients.
- Try to make sure all clients are good to pay. Chase late payers!
- Consider getting an extra job, or some other way to earn extra money.
- Send a sit-at-home partner off to work too for a bit, every week. Even £50-200 a week can be very helpful if things get tough, depending on your household’s burn rate.
- Can you increase your monthly contributions into your emergency fund?
- Can you build a bigger cash buffer some other way? (Sell something!)
- If you’ve got a lot of cash saved beyond your emergency fund that you don’t need to access, it might pay to lock it up for a year or two before the best fixed rate savings offers are withdrawn. (Ideally choose one with some sort of emergency early access).
- Consider remortgaging your home to secure a longer-term low-cost fixed rate. It may work out more expensive, but it could be worth it for the security. Decide what matters most to you.
- I’d try to keep investing new money, even a small token amount each month. (If you have found this website and you’ve read this far then there’s almost certainly something else you can cut to maintain your investing habit.) Unless you realize you’ve really misjudged your asset allocation and risk tolerance, you’ll almost certainly do better not to sell long-term investments but rather to sit it out. Market timing is incredibly difficult.
Revisit every expense
- Stop smoking.
- Seriously, stop smoking.
- Do you really need gym membership? Use the stairs and do press-ups.
- Do you really need Sky and Amazon Prime?
- Do you really need Sky and Amazon Prime and Netflix?
- Etc.
- Look at all your household bills. Switch suppliers to save £25 off gas, £15 off electricity and £5 off water a month and you’re banking an extra £500 a year.
- Can you reduce bills further by paying by direct debit and so qualifying for a discount?
- If you pay taxes on dividends or interest and you’ve got an unused ISA allowance, you’re an idiot. Taxes eat your wealth.
- Sell your expensive car or get out of your lease contract, and get something cheaper. Maybe a bike or in London a public transport fetish.
- Could your family take a holiday closer to home so you can sock away an extra wodge for a rainy day?
- Choose to rent somewhere a bit cheaper if you’re currently looking. If we do enter a recession then haggle even harder to reduce your monthly rent.
- Own your own home? Is your house a 90%-mortgage backed indulgence that you can only really afford if both of you keep your jobs and all your bonuses come in on-target, just like in the good times? Really? Might want to rethink that.
- Watch out for frivolity-creep like daily lattes or e-books you never read or the odd Deliveroo blowout that’s become a three-times-a-week staple.
- Have you been supporting family members, or direct debiting into a niece’s Junior ISA? Good for you, but if your numbers are looking tight you may need to stop it. You have to fit your own oxygen mask first, if you’re to be around to help others!
- Sell your super-yacht if you’re rich. Skim through these 101 money saving tips if you’re not.
Also see my co-blogger’s excellent article on saving tips for a more motivational pep-talk. He went from a big spender to a master saver through the judicious use of a budget.
More ideas? Please add them in the comments below.
Stay alert for surprises
Because so much is now potentially in flux, it could pay to be even more engaged with your finances than usual.
I’m not talking about swapping passive investing for twitchy day-trading.
If you’re a passive investor with a proper asset allocation, leave it be. (You’ll probably do better for it).
However with your personal finances – or any active investing you engage in when The Accumulator isn’t looking – this is not the time for complacency.
Surprises could be positive or negative. Future policy responses might soften or delay the blow – at least for a while.
We’ve already seen the Bank of England cut Bank Rate to 0.25% and introduce a range of other emergency measures. It could well cut rates to zero.
It’s all bad news for savers with cash languishing in terrible savings accounts (and for banks for that matter). But it could be positive for some other kinds of investments, especially government bonds.
I also expect various government actions to do more to try to revive animal spirits – or even just to directly inject cash into the economy.
Besides approving infrastructure projects or similar, this could involve things like cutting corporation or capital gains tax, a stamp duty holiday, and perhaps even dramatic measures like the financial crisis’ temporary cut in VAT.
A pandemic is an unusual sort of economic meteor, however. Cutting rates and taxes to encourage us to go out and spend more conflicts with medical guidance to stay indoors. Perhaps more direct support to stop previously viable businesses going bankrupt before better times return will need to be considered.
The State’s strained finances will certainly be weakened by any recession, so we can expect tax rises down the line.
Hope for the best, but prepare for the worst
Even if you’re confident you’ll retain your earnings power in a recession, being nimble might help you retain your wealth.
If you’ve got a globally diversified portfolio then it should have already cushioned some of the existential pain at home by boosting the value of foreign assets in sterling terms – as well as the share prices of companies that earn most of their money overseas, like the bulk of the FTSE 100.
However at the time of writing this looks like being a global retrenchment. We’re all in it together – and that includes our stock markets – so unlike the Brexit hit in 2016, foreign markets are not going to offset the pain. Owning top-quality bonds and having a chunky cash allocation has been the only real safety cushion to-date.
In the medium-term, the virus should pass. I don’t think the world is ending.
However there’s a danger we get into a self-reinforcing downward spiral – or that civil unrest or other kinds of unforeseen disruption such as a credit crisis make matters worse.
Let’s be careful out there.
Please note: Earlier comments on this article may refer to previous recession scares – I’ve left them in for historical interest. Other suggestions as to how readers can take personal finance related action ahead of any recession are welcome.
- A technical recession is two quarters of negative growth. Like British summers they don’t amount to much and can be easily missed. [↩]
Comments on this entry are closed.
“To keep things on track for the majority, I will be deleting off-topic commentary” – Oh well, I’m still going to say this anyway:
The idea that we’re living in a computer simulation is in no way better than the idea that the flying spaghetti monster created the universe, or that we’re sitting on top of an infinite stack of tortoises! It’s unfalsifiable twaddle.
Hi All
I started some years ago via Vanguard Index Funds to make my Portfolio a Worldwide one rather than UK centric.
The main driving factor being that the UK was an increasingly small player on the world stage-the US stockmarket -equities and bonds-are after all over 40% of the great game
Currently my Portfolio is 5.2% up since Brexit and rebalanced.
Will this situation continue-is this the way to go?
This Portfolio worked already through the 2008 debacle so will hopefully work again this time
xxd09
One thing I am particularly interested in is how large the old cash emergency fund should be. Would be interested to see if there is any consensus on it, and how any thought of recession may affect it.
I thought I was holding about 3 years worth, but just double checked and its more like 4 years. I’m thinking that may be a bit too much..
@John — Hah, you can have that one. 😉
@TheRhino — Yes, the $6 million question. (Well, I’d say not literally — that would be excessive! 😉 ) Follow the links above for my views, interested in others.
Like always it’ll be a cost benefit analysis. I even know some wealthy PF bloggers who have advocated using credit cards and so forth but for me — particular if you’re trying to harden yourself against economic uncertainty — that’s counterproductive.
Economic speculation hacked out by @TI! 🙂
[Continues…]
You’ve laid out a nice series of sensible steps for people to consider. Yet, it should be said, these are the things people should always be considering and therefore should always be accounted for in people’s plans.
For most people, attempting to significantly adjust their sails in anticipation of economic forecasts will prove as unfruitful – and potentially damaging even – as their attempts to forecast and position for anticipated stock market movements – their emotions and the uselessness of most economic forecasters will see to that.
Better instead to just do sensible stuff all the time and remain ‘steady’. Steady when everyone else is getting excited and gearing up; and steady when everyone else is getting fearful and hunkering down. The more experienced/braver amongst us might, occasionally, try acting moderately contrary to everyone else but for most this is probably not recommended: simply remain steady and above it all.
Life’s easier when you’re steady because there’s less to ruminate over, less to expend emotional energy on, and consequently it’s easier to discern life’s wood from life’s trees. This is certainly the case in investment and is applicable to much of the rest of life too.
Re: “government actions to try to puff up animal spirits” – what are these?
“Consider remortgaging your home to secure a longer-term low-cost fixed rate.”
If your income is stable and guaranteed this is probably a good move. I noticed on moneysavingsexpert the other day that Coventry BS are offering the lowest fixed rate ever. However, the impending drop in interest rates seems to me to risk edging a nation of heavy mortgage borrowers inexorably closer and closer to the edge of potential disaster. The temptation for many will be to convert their existing equity into yet more mortgage debt, keeping them in the “90%-mortgage backed indulgence ” situation you mention. Looking at the current property market and the apparent coming decline in interest rates is like watching someone about to puff yet one more breath into a vastly over-inflated balloon which somehow still hasn’t popped. I don’t even have a mortgage at present and I’m about ready to slip into my old brown cordurouys. I feel a great temptation to downsize or even go into the rental market for a while just to avoid being caught up in a decades long property slump of era-defining magnitude and being unable to sell or move for years, should I want to, which is not at all unlikely.
So I’d be inclined to be super-defensive with a mortgage, definitely not up-size or extend my borrowing, and take every step possible to ensure my income was as secure as possible.
@Rhino
The nice thing about a big cash fund is you can buy bargains when they come up
@TI
Very good post. I’ve been thinking of ditching my EE mobile contract and looking at PureGym. I can’t face the latter unfortunately, I like the club atmosphere of my current gym despite being three times more expensive.
The thing that scares me in all this is even if I had extra capital to spend I don’t see anything that takes my fancy. Passive I can understand, but even that with regard to a World ETF I feel I’d be paying more for it due the exch rate. Quite honestly I feel weird. I should be shopping for bargains but the uncertainty stops me from ploughing my money in. Keeping in cash feels bad, bonds I’m just expecting the unwind. I just don’t feel like anything. Further to that I topped up the kids JSIPP’s in April and just received the extra from HMRC so want to invest that but have no clue despite it being a 60 year (or maybe by the timer they get there an 80 year) tike horizon by the time they reap the benefits.
Whilst I thoroughly understand I had no ‘edge’ to begin with. I have now lost any investing mojo or drive. Strange.
Thanks for the utterly sensible advice. I’m finding that it’s harder to keep myself on the financial straight and narrow post-Brexit. While I’ve never been a big spender, it is hard to stay focused on the future when the future looks so cloudy. I’m having a lot more f-it moments over spending (mostly on little stuff) than I used to. My husband and I have pretty safe jobs, though with a lot of potential shake-up to our industry that might make work a lot less pleasant. It’s good to be reminded to keep moving forward.
Good post. Very useful and a timely reminder. It got me to think about applying the same protective thinking as I have been doing with my personal finances to my coffee shop (I know.. crazy I didn’t link the two before).
In case you’re interested, I wrote a similar style article last week: Be Ready For Anything – Surviving The Turmoil Of Post-Brexit Britain.
On peer-to-peer lending. After being pretty level for a couple of years, I’ve noticed my defaults rates on Funding Circle have been shooting through the roof over the last few months. Not a good sign.
@Emily – ditto, except worse here… My latest f-it moment was shoving most of my emergency fund (which admittedly had been somewhat excessive) into a SIPP so as to utilise all carried forward pension allowance, and then promptly writing a letter to Her Majesty’s Coffers asking them to amend my tax code. Seemed like a good idea at the time – a sort of a protest response to a protest vote. Which has left me with a little more than two months’ salary in the emergency stash. Having read the above, I recon I better get to rebuilding it, sharpish.
We keep three years’ of “essentials” as cash as part of our pre-retirement strategy. Quotes because many would question our essentials list! This is split about 50:50 between NS&I linkers and a mortgage offset account. Counting the latter may sound like cheating but mortgage was so we could loan daughter money for a house and she’ll mortgage in her name and pay us back at some point.
Elsewhere we have about 5% cash in most investment portfolios, which is hard to defend though our bond allocation is low.
I’m less pessimistic, but most of this advice applies at all times to be fair – even in the biggest upswing there are people that lose their jobs or face other hardships.
Similarly to @marked, I’m finding it very difficult to make decisions on what to put any saved cash into.
Dropped a little into the usual ETFs before the vote, then a little more after, but with the rises since and the drop in the pound everything looks expensive.
Bonds too don’t look appealing (at risk of a lecture on how the bond bears have been wrong for years, but there surely has to be a limit to how high bonds can go, and a limit to how low (or how far negative) – I can’t see any advantage of bonds over cash at this point, but once one gets beyond 60k or so, no amount of bank account juggling can get a decent interest rate.
Gold looking a bit pricey too, so reluctant to add to my gold position.
Property – need I say more?
So where to go? Commodities?
I’ll probably end up just making the regular monthly payments into VHYL, but it really doesn’t feel right at the moment.
My modest SIPP currently has ~40% cash (target allocation is 20% due to high CAPEs at the moment, but built up through ramping up contributions recently). I agonise over whether I should park that in a global tracker to ride out further £ depreciation. Will the BoE trajectory to 0% be priced into £/$ already?
> Property – need I say more?
Yes. 🙂
Those discounts look very tempting to me and I’m looking to top up my existing REIT holdings and probably buy back into SREI.
> So where to go? Commodities?
Miners maybe. Even BlackRock World Mining Trust if they are to be allowed off the naughty step.
Of course, this is only in the “themes” part of my larger portfolios, which I am seriously considering renaming my “it seemed like a good idea at the time” allocation.
I think a 3 year cash buffer only applies if you are mortgaged to the hilt, and the only emergency cash you could get would be on credit cards or remortgaging. If you’ve got other liquid investments, I’d rather be in the market getting 3.5% dividends and riding the tiger than out and getting 1% on cash. I don’t mind the idea of forced sales. The idea of using your cash to snap up bargains, which smacks of market timing, not something I like as a passive investor. I assume markets are efficient, so asset values have recession pricing built in, so you really don’t know which way they will go from here.
Re funding an extension, won’t you be able to negotiate a better deal with underemployed builders during a recession, which will outweigh more expensive bricks.
We won’t have any retirement income other than from DC pensions and ISAs for 12 years until SP kicks in (unless means tested by then!) so cash is there so we can leave equities alone if there are large drops. I’m also happy that much of it is index linked as you never know what’s going to happen.
However, I do dip into cash to fund ISAs each year if my share based bonuses don’t do the job, so I’m not precious about it.
BTW, 3 years cash is a 10% allocated as total of all investments (except house) come to 30 years of “essentials”.
@John B – No, good builders prices will rise with inflation because they can, they won’t be underemployed. Bad builders may be underemployed and cheap, but you don’t want them anyway. Build it now when you’re pound still has some value!!!
Isn’t building an extension before a house price fall just like investing in a falling stock market? And the law of supply and demand suggests that the price point of the labour part of acceptable quality building work will fall as unemployment rises.
With just two of us in a large 5-bed detached, extensions aren’t on the list!
I have come to expect (and depend upon!) the excellence of Monevator and the very many interesting and stimulating articles that appear here. This article is no exception – I shall be tweeting it to my (not very impressive number of) followers just as soon as I have finished this comment.
==> SamPriestley: I *really* enjoyed your blog post, Sam. I think that your situation and my situation are quite different, but I appreciate the insight that you presented.
Carry on as normal. If this site has taught any of us anything it’s about be balanced with our finances. Always back your self to find work or create value and if you do this it’s bargain central. These are the days of creating wealth not cowardly sitting in the corner thinking the bogeyman is coming! Be bold , be brave and be smart!
Hi. Love the blog and particularly love this post as I think it addresses many problems that your readers will be facing. Unfortunately I think I fall slightly outside this and wondered what you would recommend for my situation.
My husband and I have been working towards financial independence for a number of years and recently made some significant changes towards this goal, including selling a LOT of our household items, significantly downsizing to cut bills, and essentially liquidating much of our funds. All to allow us to get closer to FI. We have been researching where we should invest our money and were at the point where we had thought we might want a portfolio that broadly consisted of 1/3 in rental properties (70% buy-to-let mortgages), 1/3 stock in diversified passive index funds and 1/3 split between bonds and cash. The timing of the EU referendum made us hold off making any decisions and now we find ourselves with a significant amount of cash sitting in the bank (3x Santander 123 accounts), and now feel like we don’t have a clue what to do for the best.
If we keep it as cash and inflation rises then surely we’re effectively losing money without doing anything; if we buy property I’m not sure whether the buy-to-let mortgages we were looking at before are available, and surely there’s now an increased risk of house prices falling, or tenants defaulting, or interest rates rising, but if we don’t buy them we’re effectively missing out on the rental return which we had planned to reinvest; passive index funds seem like they may be a reasonably good option for the UK section of the portfolio (because surely the £ has dropped an equivalent amount) and as we are in for the long-term we can assume that the market will again continue to grow. Also I know that following the 2008 crash, many investors wished they had more cash available to purchase index stocks after they had plummeted (because this essentially meant you were “buying low”); but this leaves me with the global element of the planned passive indexes… the weakening of the pound has surely made these comparatively more expensive to buy into, and therefore I have effectively missed out before the market has done anything.
A lot of what I have previously said is that being in the game is what matters, not trying to time the game, however I can’t help but feel that we are on the extremes of normality here and therefore a little bit of sensible timing could make years of difference to when we will reach our FI target.
All and any advice/opinions would be most welcomed, although I do fear that this question may be an entire blogs-worth in itself!
@john B – hey maybe your right. Hold off the extension
@gadgetmind build an eco cabin in your back garden then let your 5 bedroom bastard house (that’s Alan partridge, not gratuitous swearing)
I just built a shed in my loft. It is awesome and could be a first in British building history
@johnb definitely a buyers market getting building work done if there is a recession. I was in the lucky position to be getting a loft converted back in 2009 and builders were basically begging me to win the business: one company director even as frank to say that he would basically run the conversion at break even just to keep his team of builders in work for another few months, as it was ‘that bad out there’.
@rhino on emergency fund size, since my income is erratic, I don’t have a salary figure to base this on, so I went for UK median income (gross, tax is a complication too far!) x2. Due to pitiful interest rate on cash ISA where this is stored, I recently set up a small standing order in an effort to keep pace with inflation.
Oh, and I too have been contemplating getting some work done on the house!
@Em M
When in doubt as to what to do, then the answer is nothing ! Sitting in cash, at a time of low inflation and low bond yields is not a bad thing in itself.
Clearly its not a good time to be buying overseas assets, the £ may fall further but markets tend to overreact and you may well find in a year or two that the £ is markedly stronger.
I would question buy to let, clearly the recent changes in regulation, taxation, generally low esteem of landlords in the eyes of the public and government, tougher lending criteria and house prices that are generally not cheap, are making being a landlord less attractive.
You may be looking at low cost properties with a generous yield but I have a couple of btl’s and thats probably two too many!
I think 1 years worth of cash reserves would be sufficient but would depend on your individual circumstances, job security, potential increase in expenses, age etc, also accounting for where else you can put it, ISA limits, SIPPs, Bank’s FSCS protection, interest rates in Current/savings account. It’s a difficult one but will need to take into account loads of other factors.
These past few weeks have almost made passive investing interesting, as the market volatility has had me asking myself (and my wife) many of the questions raised above. (Another great post by the way @TI.)
I’ve been round the houses – should my wife and I sell now to lock in those post referendum overseas gains, and have what would seem to us a ridiculously low mortgage? Interestingly while I’d given a lot of thought to how we’d react to a substantial market fall, I’d not for a moment considered that we might have a strong desire to sell after a substantial stock market gain! Perhaps we should reduce our allocation to shares? After all, the US stock market (where our global market cap weighted portfolio is concentrated) is trading at valuations above its long term average.
In the end, we decided to re-read the plan we’d written for moments like this, and stick to it. So the portfolio is being rebalanced and we’re going to keep adding to it over the coming months – despite the current exchange rate (as we don’t think we can time that either.) Maybe passive investing is boring after all…
PS – on the rainy day fund question, we found that when the ‘risk free’ portion of our portfolio built up to a certain point we didn’t feel the need to have both, so decided to combine them. As the portfolio grows this continues to become less of an issue. Note we’re 25% in cash (whether some should be in bonds is another debate we’ve had, but we’re happy with our plan despite the seemingly never ending rise in bond prices.)
@TheRhino I really can’t see the need to keep that kind of cash for emergency fund purposes. Beyond the first couple of months many forms of non-emergency saving or investment can provide some money if the holder ended up suddenly and unexpectedly without any household income.
Some examples: Fixed term cash or ISAs can almost always be accessed with an interest penalty, P2P lending even over a 5 year term would provide interest + capital returned of about 2.5% of value each month, mixed portfolios of funds and bonds could be withdrawn from to rebalance (harvesting from the side which is over-performing relative to the other).
Obviously if you’ve either got so much money that you’ll get no extra benefit from managing it more optimally, or you think you can match the performance of less available investment types with instant access cash then keep as much in an emergency fund as you like.
@Living Cheap In London – Your experience fits with the general wisdom that the time to spend is when others can’t or don’t feel confident enough to. There will be exceptions but rarely when it comes to house buying or improvement, and with improvements the only real, minor, risk is that the price may fall even further.
@John – yes, i guess it becomes a bit of a semantic argument about whether the cash is an emergency fund or whether its just part of your ‘fixed income’ part of the portfolio.
although i’ve got about 4 years in cash, I could just call it as a means of keeping my equities % at the desired level rather than being an emergency fund per se. I run about 50/50 equities/fixed income – in the spread sheet the cash constitutes part of that 50% fixed income, and about 7% of the overall portfolio so its not too dominant in the big picture. Plus I have a wheeze where I get 3% on it which isn’t typical ballache current acc tarting so its not to painful to administer
I prob will work it down a bit by just moving it gradually into S&S ISAs on an annual basis like I’ve been doing for a while until I get to 60/40 majority in equities.
With hindsight I’m glad I went full S&S ISA back in april, as i was half thinking of going 50/50 pre and post referendum. Its looking like the month after brexit is shaping up to be the biggest gain recorded so far.
My feeling is that the gains are very real, in as much as I didn’t get them with the cash I’m sitting on..
I feel for Em M and anyone else who took on a cash heavy position pre brexit – very costly.
As an aside I paid for a danish holiday the day before brexit, I was convinced of a remain win, but I acted on Kahneman s pain of loss is 2.3 times pain of gain theory. I’m stoked that I did.
I was impressed by superforecasters but even they called the referendum wrong. I think brexit has been super useful in ramming down my throat that I know nothing of what the future holds and neither does anyone else. For every argument there is an equally convincing counter-argument. So absolutely vital to remain balanced in all things
@ Em M
The long term plan sounds not unreasonable.
A ‘Well Balanced Portfolio’ may well have exposure to all four of the main Income Producing Asset Classes.
It is how you get there that seems to be presenting the problem?
Have you as yet put down in writing your Investment Plan?
For Stocks there is a technique called Value Averaging which you can google or others can link to? Similar to £CostAveraging, but might be worth considering as an alternative to £CA if Stock Valuations are troubling.
As regards Real Estate this unfortunately will always be lumpy.
We started off with one very small Flat (highest yield on smaller properties), when yields were in the 10% – 12% region (real) , and Stock Yields at about 2% (real). My wife found herself to be a very competent landlady, and further properties were added later.
There is a lot of forethought and planning needed with Residential Real Estate, and it is not everbody’s cup of tea!
And you cannnot sell at the click of a mouse to rebalance!
Trust this helps to some degree.
One interesting thing (to me at least) I was thinking about earlier, was that prior to BREXIT people were suggesting that there would be significant downward trends in the UK markets should the vote be for leave.
You just can’t predict how things will play out. My portfolio at the moment is touching new highs. I know it won’t last, but if I’d taken things off the table on June 23, then now I would be pretty peeved.
Just got keep playing that same old game of tossing a few coins in each month I guess.
An excellent post and particularly relevant to my own situation at this time – a petroleum engineer’s employment at $50 a barrel is as precarious as a Boris Gove bromance.
As such, I’ve been battening down the hatches. At the risk of turning this into a Viz ‘top tips’ style thread, my main gains have been had by ditching an EE phone contract for a Three SIM only deal which by using tethering has allowed me to ditch my broadband also. Throw in the fact that the data allowance with Three can be used at no cost throughout Europe and the savings are several hundred pounds a year. Wish I’d done it years ago.
@nearly everyone — Enjoying the discussion. Thanks! 🙂
@recent deleted comments — Sorry, I have to be even-handed about this. I am deleting comments calling me a “Remoaner” or worse, comments predictably but hilariously claiming that little ole Monevator is going to help talk the UK into recession (rather than, say, Brexit giving us a recession), and comments from people who have challenges reading as well as counting (I say in the article “I don’t say a recession is a certainty.”)
So it’s only right I delete speculation/similar on the other side, too.
It’s a difficult balance to get right (i.e. where “how to prepare for a recession that may or may not come but that I think is now more likely, and thus something to start to think about and perhaps act on” turns into “here’s why we are/are not going to have a recession because of Brexit”) and I may not be always getting my decisions right.
But I’m trying my best to keep this thread from turning into another Brexit bun fight.
Cheers!
This post is good advice for any recession, I’m not even thinking about the Brexit-specific angle. Shared.
@Em M there is an argument (which I think was put forward in an article or two somewhere here) that once you’ve got a sensible plan, you’ve just got to start, no matter what the weather.
@Em M – I agree with @The Rhino. In a low interest rates environment, it’s hard to know where to turn. I had the same issue a couple of years back when I started out, as many asset classes were (and continue to be) at high valuations compared to their long term averages. I looked on enviously at those who were able to enjoy the property and stocks bull markets ofthe 80s and 90s, thinking ‘if only’.
But the point is that no one knows what will happen, the market is what it is, and you can only sensibly invest over the long-term. And over the long-term, short term market fluctuations become less relevant. It would make sense to factor in the potential effects of falling valuations (back towards their longer term averages/more ‘normalised’ levels) on your expected returns, but that’s not necessarily a reason to miss out on the dividends and returns that you’d receive each year.
If you have a coherent strategy that fits your risk profile, then there’s a good argument to just get started. Even if just a little more cautiously at first as you see how you go.
I am interested in what does the ‘risk-free’ portion of your portfolio constitute? There might be something I am missing out on!
I know right! This investing thing is so confounding.
@FP haha, its a strange use of the term risk-free for sure in light of the events of the past few weeks (the invisible hand of the currency markets has snaffled over 10% of it away) but I think it refers to holding cash in FSCS protected accounts.
”But the point is that no one knows what will happen, the market is what it is, and you can only sensibly invest over the long-term”
This wouldn’t sound out of place in a Buddhism Zen teaching. I find many of the passive investing mindset can be applied to other aspects of life as well.
‘A mosquito just bit me! oh well it happens sometimes when I have blood and as long as mosquitos hunt for it.’
Accept that is part of life and don’t struggle too much. Life is difficult enough without having to worry about the market, so enjoy it!
The closest thing we have to risk free right now is inflation linked government bonds. These are on negative yields, which means that people are prepared to lose some of their buying power in exchange for retaining the rest of it.
This speaks volumes about other asset classes!
No way am I giving up my NS&I linkers!
@GM I spoke before about selling my NS&I ILSCs, for the simple reason I just had too few for them to be doing anything useful in the big picture. I didn’t do it because I am lazy.
It would be nice if they came on sale again. I would beef things up in that area pretty substantially I think..
We got lucky and had the cash in May 2011, which was close to last chance to buy. We did one each plus one in trust for each other and daughter also snagged one. She’s ditched hers to reduce her mortgage, which was sensible, but we’ll most likely roll ours over.
I’m not sure which we’ll touch last, the NS&I linkers or our ISAs. Pretty much everything else will have to have gone by then other than my pension.
@ GadgetMind
We have the same problem with my mother’s assets; NS&I linkers versus Cash ISAs in regards to withdrawing nursing home fees.
With the sterling drop and HSBC forecasting 4% inflation (not sure which measure) by end 2017, we are inclined to draw from the linkers last.
But then, what do HSBC know?
Another really useful post, thank you.
My passive portfolio – which owes much to Monevator for its construction thank you – has fared well since Brexit. However having set up the allocation in line with risk v return targets, I did not – at the start – have a planned timescale for if, when and how, to reduce equities exposure in the run up to drawdown.
My allocation is 70% equities (15% is exposed to UK equities), 20% bonds, 10% cash including P2P. I can take more risk than some because I also have a mortgage free BTL.
But this latest post makes me wonder whether now is the time to reassess my asset allocation in the run up to drawdown. My investment horizon is about 5 years, which is probably the time during which any impact of Brexit will be most dramatic. On the other hand, unless the EU project falls apart as a result, the fortunes of the UK is unlikely to have any major impact on the global economic outlook. So any comments or suggestions about my asset allocation would be very welcome.
Hi @Fireplanter – I don’t think you’re likely to be missing out out on anything, except perhaps the apostrophes – cash and UK gov’t bonds 😉
@magneto – I expect inflation of nursing home fees will be a major problem! And unless sterling somehow recovers, that inflation forecast seems about right to me. Take a look at the prices of inflation linked gilts (such as the INXG ETF) to see what markets expect.
Of course, they could be wrong, but even so …
@The Rhino – Haha, yes, does seem a bit like that. But really only by 10% or so if all your expenses are in dollars and/or other foreign currencies.
@Rob – absolutely, I noticed that cool bike I like the look of is still the same price in £ as it was a month ago, yet my portfolio is up ~10% in £ so all good for the moment..
@Miles — Cheers! Here are a few posts on the subject that might help:
http://monevator.com/getting-older-admit-it-when-you-rebalance-your-portfolio/
http://monevator.com/how-should-you-invest-for-your-age/
http://monevator.com/investing-for-100-year-olds/
Sounds like a free bike to me…
I don’t believe in freebies. There’s the opportunity cost……..
Another creative accounting technique I use is to offset any bike cost against the money saved by commuting on bike rather than car/train – so all my bikes are free anyway regardless of brexit.
I earn £3.40 per hour that way. Its a bloody hard way to earn a living. I haven’t been paid that little since I was a kid. But it adds up – since the 1st time I rode in to work (18/06/2013) I’ve saved £1324.90 and covered 10,339km. I think the value prob isn’t in the £s but in the legs and lungs.. I have been run over 3 times though as well in that period so its cons as well as pros..
I love cycle commuting. My employer pays me a travel allowance, and a car allowance for not having a company car, and does a Cycle To Work scheme every year. On top of that, I’ve also had a total of £5k+ from insurance companies after dozy drivers have driven into me, so yes, cons!
Top tip: Get a video camera and use it on every trip.
That’s one way to supplement your income in a recession, become a Slipping Jimmy!
@JB haha – never heard that phrase before – had to look it up. I’m no slipping jimmy like GM, the Rhino is a too hardy a beast for that sort of game.
Funnily enough I just renewed my Vodafone sim only contract…4gb data, 1000 minutes, unltd texts and 500gb EU data for £10.80 a month…with two months free !
I’ll buy a new wileyfox swift when this one gives up the ghost.
That said… I’m itching to borrow to invest…I spoke with my bank who would extend my mortgage by another 1 times salary and fix it at five years for 2.39pc… if HSBC is right and inflation does rise I’ll be able to inflate my debts away with a whole load of assets to show for it…
Ah, they don’t say patience is a virtue for a laugh…
Be aware that the benefits safety net is rather threadbare.
For instance, Job Seekers Allowance (JSa) is £73.10 per week. For those receiving contribution-based JSa, payments stop after 26 weeks.
If you have a capital over £16k, or a partner working 24hrs or more pw then that £1,900 (less your job-seeking expenses) is the sum total of help you will get with living expenses.
If you are unfortunate and fall ill / experience disability, with much reduced chances of finding work, then the situation is truly bleak.
The benefit for those judged not fit for work (ESa) and placed in the Work Related Group is £102 pw (falling to £73 pw next year). Even with Housing Benefit (help for those renting their home), and a discount on Council Tax, long-term financial survival is a very difficult.
The stress of this, together with coping with an illness, and the frequent flawed DWP work capability tests, often result in people with physical difficulties developing depression and other mental health problems.
Working as I do at an advice charity, I can only re-inforce the importance of having an adequate emergency fund.
@JB – We’ve never struggled to find worthy things to spend the money on, but let’s just say that I invest a lot of energy and attention towards not getting broken bones. However, some car drivers seem more intent on “CUL8R LOL” than looking out fir cyclists! Most of that money was for a fine collection of broken ribs, which hurt like hell and are best avoided.
The big risk to my financial future is inflation once I am locked into a fixed income stream with limited protection (rises capped at 5%). This is causing me to explore transferring a DB pension into a SIPP. This brings the issue of what to invest in if I do this. I like the idea of the Vanguard lifestrategy funds as a core but I am no longer persuaded by the equity/ bond asset allocation arguments. These are not normal times and the bond market is now vulnerable. Bonds are not safe over a 10 year timeframe. In my view now, it comes down to linkers as the best of a bad job, equities and cash. Instead of a 50% bond allocation I think 25% IL and 25% cash is much better. Of course when inflation moves the cash has to be invested but at that time the bond markets will already have cooled. With current low inflation and low bond yields cash is a valuable asset!
@ MrOptimistic
Some queries :-.
Rises capped at 5%. Is that bad?
Can a proportion of DB pension be transfered to SIPP?
Some of each (DB + SIPP)?
I.E. Diversification of Risk?
Has the generally long duration risk of IL Gilt Funds been factored in, or are individual IL Gilts being contemplated?
How poor is the yield on capital in the DB Pension?
A key question!
Might not DB Pension be the least worst and perhaps even the safest option?
In your shoes would take some time on this very important issue!
Would also seek independent advice!
All Best
Yes, given the pension prospects for the younger generation have to be careful not to moan! Another objective I shall fail with. Have to get independent advice by law if more than £30k at stake. Not an easy decision. However owing to a job change I have two DB pensions so the idea was maybe switch one. It’s an all or nothing thing, can’t do it by proportion although as a fall back you can take the 25% tax free bit out.
Thing is, being of an age which has seen some periods of high inflation, a burst of inflation significantly above 5% would be harmful and once out of work there is no question of increased pay eventually compensating for it.
The DB doesn’t have a meaningful yield on capital, however the transfer value may be something like 25:1. So a £5k pension becomes £125. Then you subtract the advisors fee and start paying SIPP charges, say 1% PA.
Yeah the duration of IL funds is hard to dig out. Think it’s 24 y?ears for the L&G tracker, much too long. Better to hold directly. Bond funds are not the same as holding the bonds: can’t just sit and wait for redemption at maturity.
So cash is king, but QE will hurt cash savings.
I’m roughly 50:50 equity/cash. Not sure if I should change this. I think I may have to bite the bullet and see an IFA.
No one knows, these are uncharted waters. In terms of my emotional asset allocation, given I am past 60 and staring retirement in the face, I reckon 60% capital protection, 30% income and 10% growth.
The magnificently open and clear minded articles on this site are the equal of any half parsed IFA. No point going to an IFA if the real issue is lack of certainty over your objectives. Age is a big factor. If you have time, but you are reasonably sure you will not have sufficient in x decades, then why cash or bonds?
If you haven’t time then irrespective of any other wish, income, growth etc, capital preservation comes first as without this you get nothing!
Not really true though as most builders sub out work. Take a look back at forums for plasterers, brickies etc in 2009-2011. Day rates at £70 a day down from £200 and whilst good builders will be busy they will have more margin in a build for discounts. If you sub or employ loads of guys then yes they will be desperate to keep books full and not lose good workers. A good time to do an extension if you ask me is in a full recession.
So as you can see I’ve re-published our ‘Prepare for a Recession’ article in light of the COVID-19 pandemic.
If you think this is a contrary indicator and the bottom may be in market-wise, I wouldn’t blame you! 🙂 But there’s still a big personal finance and real-world economy aspect to all this.
You should probably add to this: build up a 6 month cash fund ASAP!
Stay safe everyone. I’m just forgetting about money at the moment and bunkering down till we get through to the other side and pick up the pieces.
I think money is going to be the least of our worries over the coming months. I hope I am very wrong.
Stay at home and self isolate
How long does anyone think that these closed down nation states/economies can last economically?
When will they have to open up economic activity again regardless of Coronavirus just to survive?
Could be a 10 year recession in worst case scenario with all the damage being done to businesses
Buying on the dip seems rather irrelevant
Is you fridge full?
xxd09
xxd09
Wow, gold 6% down. Someone really does need cash! If I was tempted to buy anything, this might be it.
That one line about tenants late with rent still leaves a bad taste in the mouth.
Wpuldnt mind your opinion monevator. I’m in a good position. Low mortgage borrowing on interest only as of this month . 3 to 5 months in cash and another 3 to5 months in a 40 %/60% equity bond fund for less volatility. No other debt. I am considering rather than paying extra into investments as I was going to by going interest only potentially just continuing at current levels and building more cash. I thinks that’s more sensible than even selling my high bond fund
Thanks
Thanks for the timely advice (and indeed all your other invaluable advice since I discovered your website).
As mentioned on another thread, I am in the unusual position of being likely to have a significant injection of cash in the near future. My late mother’s affairs are currently being unwound, and assuming exchange of contracts on her house happens as planned tomorrow, in a few weeks time I will be holding more cash than strategically sensible in normal times. But these aren’t normal times! We already have adequate cash reserves and paid off our mortgage when we benefited from the more liquid assets (building society accounts etc).
So there are questions. It probably makes sense for my wife and I to open another building society account each to ensure all cash quickly moves within the standard £85K protection. But should we put money into stocks? If nothing else we have new ISA allowances in April.
I appreciate this is a “first world problem” different from most forum readers. But ideas (obviously recognised as not professional advice) welcome. We could of course follow one of TI’s many bullet points and consult a trusted financial advisor (we have one who was very helpful on a single-fee basis for our transition to retirement over the last few years).
I haven’t read every comment so sorry if this one has come up…
But get a quote for ‘ London Power’ if you live in London. Saved me 25pc on my already competitive Octopus rates. If you are already on Octopus they can switch you over the phone
Other than that… good luck, take care and remember you are worth more than what your employer makes of you 😉
‘Be greedy when others are fearful’
I am switching out of bonds into equities which are now a screaming ‘Buy’ at these prices. In five years time this will just be a small dip on the chart.
Just tended to my wounds.
I took a positive from the fact my accumulation ftse100 units are still at their mid 2016 price – it looked worse but the dividends clearly helped a lot.
Preference shares from similar time down 10% – but have yielded well in the interim
P2P – I just hope it’s not a train wreck..
Good luck /happy hunting
B
Ps +1 for OMY
> Someone who keeps their job and sees their mortgage costs fall might not even notice.
I was that fortunate guy, in ’92. Mind you, I saw interest rates at nearly 15% and the value of the house fall dramatically. And you do notice. I saw both neighbours go, one repossessed, the other jumped before they were pushed.
I am with the pay down debt. I don’t have any, but I am going to stop using credit cards now, because while I pay them off each month, switching to using a debit card means I can’t be dunned for late payment if the online banking system jams up. If i want to bu ya new telly and get section 73 protection I will prepay the credit card. And I have spread some savings into three different institutions so if one bank seizes up I have diversity.
Valuations needed to go down. I’d say they still need to go down a decent way. This is not purely a crisis of confidence that it’s all been up in the sky for too long, there is a genuine out of the blue threat to the scale of economic activity that means future earnings will take a hit for a while. I guess the upside is that a lot of zombie activity that’s been on life support from low interest rates for a decade will be flushed out. I do feel for the poor devils who will lose their jobs in such operations. Creative destruction is no fun when it’s your job/industry at the sharp end.
@Boltt. I have averted my gaze and studiously avoided looking at my accounts. It will ( eventually) be interesting to see if prior decisions about stuff like asset allocation or fund selection proved correct. Think we all believe that our brains and thought are an asset but if we didn’t think then we couldn’t fool ourselves either.
Without a crystal ball any decisions I make at the moment are in fact guesses. Red numbers or black as the wheel spins. Not to be confused with ‘ strategy’ !
If we don’t know what is the right thing to do then I reckon do nothing ( but at least recognise the primal importance of cash and don’t be too quick to wager it on a hopeful bet of enhanced future returns and windfall gains, unless of course you can afford to be proven wrong).
Yes – this has to be the ultimate poster-boy for the ’emergency-fund’, and an emergency-fund is not the same as a ‘dry-powder’ fund. Rebalancing and normal monthly investments are probably the way forward, much as I wish I had a massive ‘dry-powder’ fund due to some sort of unique prescience on my part..
All excellent advice, although:
“If you have a financial advisor you trust, now might be a good time to visit them”
reminds me of some friends who, upon coming into an inheritance last year, were advised to invest it rather than pay off their mortgage.
One of the funds in the portfolio was Woodford, the rest of the funds have tanked, and one of the friends has just been made redundant.
The mortgage still needs paying. The IFA continues to get their ongoing fees for the “managed portfolio”.
Personally i would hold at least a years expenses in cash, maybe two. Perhaps this is extreme but I don’t like where we are heading. I wouldn’t sell to get this, but I plan to divert more to cash rather than buy cheap. At least it is the start of the tax year so should get a rebate if the worst happens.
My challenge is nursery fees. All the benefits come from two parents working, so stop work and the costs shoot up. Take them out of nursery and not only does job hunting get harder but there is like a year and a half waiting list to get back in…
Another great post! Thank you!
I myself am in the middle of buying my first property in London. The timing is simply “great”. I am really not quite sure what exactly to do, to be honest. Should I continue forward with process? Should I wait for the storm to pass?
In general, I would be able to pay the mortgage, even during a potential recession, but I really don’t want to buy such a highly leveraged asset, just to see its price potentially fall substantially in a really short span of time.
What are people thoughts on that? Is it better to wait in such times? Is it better to stick with original plan?
Regards,
Martin
Hello,
During this blog you briefly mentioned how having a global diversified portfolio should have cushioned the downfall from this crash in terms of the value of the sterling. Do you have any blog posts which explain further what it means to a UK investor and investing in pounds sterling and how our investments are affected by currency fluctuations?
@Faisal — Sure, have a look at the articles below, some of which are quite old but explain the principle well. Please remember this factor (properly called “currency risk”) can work both ways, so sometimes an investor will benefit and sometimes they will lose.
https://monevator.com/tag/currency-risk/
Thanks!!
I have pension funds which has over 80% held in Equities in various Global markets with 8% of the rest in Cash. Yes I took a bath on the Equities since February and knew it would happen when I saw Cramer on CNBC give a one hour monologue on the corona virus the day the Italian outbreak took place. I hold half of the pension funds in direct shares which I have picked including stalwarts like Berkshire Hathaway, Apple, Adidas, Nike, Google A, Danaher Corp, SAP, Tesla, Tencent ADR, Visa, Scottish Mortgage Trust, but the weakest part of my portfolio is the UK 250 and lesser shares although they are all good businesses. I spend a lot of time researching and watching companies before investing. Like Warren Buffett I feel that I have to hold to the Long Term view of Equities but when you see two total incompetents in the US and UK in charge of dealing with the Covid-19 crisis then one loses confidence in the Long Term hold approach. The irony is that I know that a new anti-viral drug or vaccine may change the entire investing perspective and the markets will take off again. But that is a known unknown!!!!
@Martin I’m in the same position! We were planning on buying our first property in London before all this happened (40% deposit on a modest property in a ‘stabby’ part of London after 10+ years of savings in professional jobs). Very little on the market at the moment. Wondering whether to sit tight for a while longer as we’re currently living with family so not paying rent at the moment. Hoping prices come down a bit as everything is so expensive (i.e. overpriced). Would be interested in hearing advice to FTBs in London too!