tactical trader

What a few weeks it has been, the FTSE has been dancing around the magical 6000 figure causing fear and excitement in about equal measure. Who knows where it will be by the time you read this, I certainly don’t. What I do know is that this is a very dangerous time for the average investor, by average I mean those who believe all the hype about the return of a serious up move and have rushed headlong to make the most of their ISA allowances.

I read recently that unprecedented numbers of people are now returning to equities, especially as they are now realising that the property honeymoon is over. Clearly for the professional trader there is money to be made here as the professionals cause the market to whipsaw up and down to take maximum advantage of the gullible but what about everyone else? The people who, once again are entrusting large chunks of their savings to a market that bled them dry just a few years ago. What short memories people have.

The answer as always is to diversify. Yes the FTSE has had a good run, yes it may well carry on way beyond the 6000 point fuelled by demand from the returning flock but what if it does not? If you have everything in the FTSE you are stumped. Far better in my opinion to have part exposure to the FTSE and at least then you will get something from any up move but you will also be protected from any downside by your other holdings. You have been warned.