Cruisin' (for a Bruisin'?)

It's not a fair fight, ref!
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The financial markets are thrashing about at present, and I'm feeling fairly well pummelled, with the portfolio struggling - and failing - to keep above water over this second quarter of 2013. Investors seem to be trying to take profits (as I have) and find some kind of 'safe haven' for their money. The lesson of experience is that it is in these periods of turmoil that it is possible to pick up bargains - if you are lucky!

However, one of the tests of an investment approach is how stable it is: whether you can go off on holiday for a couple of weeks and not face financial ruin while you are away. Is your portfolio open to major market or security risks that actually need your constant attention?

I have written before about our family's choice of cruising for a holiday. When we set off for the Arctic (!) this year, I don't intend to be managing our portfolio of ISAs and SIPPs - in fact not even looking at them for a couple of weeks. So, am I cruisin' for a bruisin'? Will the market steam-roller me?

Portfolio Buy: HSBC Holdings (LSE:HSBA)

Is it still dangerous?
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It's fair to say that the securities markets are in turmoil right now. No-one knows quite when and how the 'tapering' of QE is going to impact the market and investors are frantically trading their way to what they hope will be a safer portfolio structure. Many will be taking profits and holding cash on the sidelines, watching for bargains.

I have already taken a lot of profits and my strategy is still to look for income-producing assets - but diversifying away from the UK, whose economy I suspect will wallow in the doldrums for a few years (with possibly the  exception of commercial property).

But is it safe to go back into the banking water - or are the financial sharks still circling, ready to snap up any fresh meat?

Evolving Strategy

Neither fish nor fowl
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One of the fascinating aspects of investing is that the financial landscape is constantly churning and bubbling away, continually evolving into something new and – sometimes – unexpected. This presents any investor with the basic challenge: how will the investment approach they have chosen deal with the new, emerging market situation? Indeed, can any investment formula be repeated successfully?

The answer, I would suggest, is that new situations require a new approach: what worked last year may not work now.

Portfolio Sale: BAE Systems (LSE: BA.)

 Sometimes you just need cash and you have to sell something. What do you choose? Do you sell your 'losers', like you are supposed to - or your winners?

This is the kind of choice that reveals a lot about your investment style and your behavioural biases. In my case,  I have to hold my hand up to a very common bias - I don't like selling losers: its called the Disposition Effect (i.e. 'disposing' of winners too early). Does this make me a bad investor?

Portfolio Buy: Standard Life Investments Property Income Trust (LSE:SLI)

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The search for yield is harder today than for many years and anything yielding more than around 5-6% will have its own specific risks. After selling some chunks of fully-price fixed-income securities, I need to find somewhere to put the cash to work - but without losing money, if possible.

The problem is that most fixed-income is heading south and equity markets are yo-yo-ing in reaction to comments on the potential end of QE by various governments around the world.

Is it time for commercial property?

Portfolio Sale: Halifax plc 9 3/8% 2021 Corporate Bond (LSE:EH21):

Going down?
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In addition to my recent sale of a Lloyds preference share, I have also sold this Halifax corporate bond.

The thinking is the same: at some stage soon government bond prices are going to fall (as Quantitative Easing unwinds), meaning that the yields from these 'safe' government securities will rise, bringing down the price of other fixed-income securities.

Portfolio Sale: Lloyds Banking Group 6.475% Non-Cum Pref Shares (LSE:LLPE)

Cashing in some chips
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It is turning into a busy time for this 'buy-and-hold' investor.

The current turmoil in the financial markets is a sign that things are changing - and one of those changes is, I believe, anticipation of the economic landscape without Quantitative Easing (QE) and its variants around the world.

For a yield-oriented DIY Income Investor this presented a conundrum.

Dividend Investing: Value or Income?

An insight about the DIY Income Investor strategy has been slowly dawning on me: that investing in high-yield dividend shares is actually a form of 'value' investing - in other words, buying out-of-favour shares that have good fundamentals at a good price (but in this case also high yields). This was highlighted by my recent rapid purchase-and-sale of Homeserve.

Well, here is some interesting analysis that seems to nail down that issue - and the conclusion is quite encouraging.

Portfolio Buy: Vanguard All-World High Dividend Yield ETF (LSE:VHYL)

Is this the new 'must-have' for the geographically-diversified DIY Income Investor?

We are fortunate in the UK that the LSE is itself pretty international in nature. Having said that, I have been trying to diversify away from the UK. In most cases it is difficult for a UK investor to hold foreign shares directly because of tax complications, in particular, the need to reclaim tax deducted at source. For that reason, I use Exchange Traded Funds (ETFs) to diversify away from the UK - they take care of the tax 'admin' and generally have lower costs than equivalent traditional 'funds' (which are more heavily marketed).