Date

7th August

The current market turmoil

As global equity markets plunge drastically, the question on most of our minds is do we now sell, hold or buy. Unfortunately the basic STAR screening system was never devised to handle these difficult, but vital, questions. As I have written, on numerous occasions in the past, the STAR screens only cover the allocation of funds to new UK equity portfolios or the re-allocation within existing ones. The questions relating to overall asset allocation as between the various sectors such as cash, fixed interest, managed funds, direct equites, real estate and the many other asset classes really require the help of one of the few really experienced and knowledgeable professional advisers combined with a clear understanding of one's own needs and preferences.

Having got that caveat out of the way I shall outline the tactics I am using for my own investments in case this is of any help to others. The first point to make is that my own equity portfolio is designed to generate a rsing stream of income over the coming years to meet family living expenses in so called twilight zone of semi-retirement. However, my own attitude to risk is much higher than that recommended by most advisers as the bulk of my investments are in equities. I suppose this is not surprising in someone who espouses the long term merits of value investing. Anyway, my reaction to the current fear stalking investors and the consequent sharp fall in share markets around the world is to make a careful evaluation of the cash generation and hence dividend paying capabilities of my existing holdings. I shall only sell those holdings that appear to be unsupported by above average current and future dividend yields as I still prefer to be invested in the ownership of successful businesses than in the loan market - particularly that of the public sector. I admit that in the short term this may result in the further erosion of capital but am prepared to accept this provided that the dividend stream still remains more or less intact.

John Mulligan