To provide a yield in excess of that offered by the UK Stock Market whilst, at the same time, offering the potential for capital growth over the medium to long term.
Following on from the historic September, October was equally eventful marked by large market swings, negative investor sentiment, global co-ordinated monetary policy action and unprecedented and large scale government bailout plans for banks. Stock markets globally had a rocky month, tumbling lower on the back of increased investor panic and recession worries.The MSCI World Index suffered its worse month in October since October 1987 while MSCI Emerging Markets experienced their worst month since August 1998 (Russian Debt Default). The volatility index, VIX, reflected the large day-by-day market swings, hitting record levels over the month. Monetary actions over the course of the month helped to try and establish a floor for falling markets, staving off the spiralling negative sentiment which had led to indiscriminate selling.The US bailout plan, TARP, finally got approval while the UK formulated its own multi-billion pound rescue for its troubled banks. The UK's plan was copied across other European countries as day by day newspaper headlines read of government injections of capital into large household banking names. From a portfolio perspective, rationalising the market moves by fundamentals became virtually impossible in a market led by emotion.As the month wore on and as more companies reported slowdowns in earnings, worries about global recession, its depth and duration, grew. Towards the end of the month some stability was found in equity markets but sentiment remained low. Armageddon may have been avoided but it remains to be seen at what cost this has been averted and we are now back to a familiar problem of corporate profit downgrades.Over the course of such a difficult month, we looked to take advantage of the wild market swings, buying during dips and changing our stance from defensive to one of cautiously optimistic. Refraining from short term emotional decisions, we have looked to align our positions with an eye to long term perspectives. We added to equities via an Exchange Traded Fund (ETF)when markets hit a low point and although markets see-sawed from that level,they ended the month higher than mid October levels.
