At the time of writing (late July) the equity market has risen by around 10% over a two week period and sentiment seems to be quite strong, if still a little jittery.

Fixed interest government bond prices and yields are around their 12 month average. Corporate bond yields have remained much higher than government bonds – even for investment grade issues – as the market remains cautious about the ongoing ability of companies to service this debt.

Short term money market rates languish below 3% (much lower, in fact, for shorter-term money).

Only commercial property funds offer any kind of predictability. Many commentators forecast continuing falls for the foreseeable future.

The Pensions Office sees little real confidence amongst investors, with seemingly few people prepared to forget the losses of recent years. Poor investment performance is not easily forgiven. Certainly not by With Profits funds, anyhow. Our continuing review of these funds reveals that many are continuing to declare no reversionary (i.e. ‘annual’) bonuses, opting instead to maintain a flexible bonus structure based increasingly on terminal bonuses which may, unlike reversionary bonuses, be withdrawn without notice.

At times like these it is even more important than usual for investors to maintain a balanced portfolio. This can not, and will not, enjoy “all the fun of the fair” when only one of the investment asst classes increases in value, but it will protect the value of the portfolio against severe falls in any investment area. A balance, then between equities (UK and overseas), fixed interest (government and corporate bonds), Index linked securities, and cash. Avoid property funds for now. 

So, if you are one of those investors who remain disenchanted with the past investment performance of your pension arrangement and scared of prospects for the future, where do you turn?