as part of an assignment, i am required to invest a million pounds. the only criteria i've been given is that its objective is to provide a balance between income and capital growth. so far, i've divided the assets into the following:

44% fixed income bonds (£440,000)
18% large cap value equities (uk) (£180,000)
18% large cap growth equities (uk) (£180,000)
4% small cap value equities (uk) (£40,000)
4% small cap growth equities (uk) (£40,000)
10% international equities (£100,000)
2% cash (£20,000)

I've tried to blend fixed income bonds with both growth and value orientated investments (equities basically...) to create a balance between income and capital growth. Furthermore, I've tried to diversify enough to create an appropriate risk profile for the balanced investor.

What does everyone think? Because of the diverse nature of the question, I'm still to decide on the individual stocks and bonds that will make up the bigger blocks.

Thanks in advance
Twee

To be honest, tell your teacher it's all crap - it's impossible under current conditions to ensure you maintain the balance as equities and their dividends are all shot to pieces, and there's an asset bubble building up in the bonds market.

That means it's impossible to make a value judgement on income and growth at present because of the financial crisis.

And if your teacher says "oh, ho, smarty pants, but I'm talking about under normal conditions" you can tell him that normal conditions no longer exist and will not exist because the entire underlying principles of capitalise markets are being profoundly rewritten by the existing crisis, and therefore it would be impossible and even detrimental to presume past conditions are in any way or form going to be an indicator of future economy performance and principles.

From a more personal point of view as an investor - it is *so* easy to start breaking down investment into equities according to cap, etc, but in practice, it's all completely bollocks. All you do is create pretty patterns, but none of it reflects realities.

For starters, you must understand something of the stocks you are looking to invest in, and sometimes there just isn't the opportunit to spread as wide a risk as you may wish on paper - because at the end of the day, it's all about opportunity, and conditions change quickly. For example, 6 months ago RBS was a large cap equity, but now it's a penny stock. What would an initial paper strategy regard it is?

It's all about risk, and managing risk, and this is so condition-centred it's unbelievable. For example, I'm currently invested in US and UK financials (5:1 ratio), because I think the US financials have been over devalued. I mean, Bank of America at $3.50 a share? Ridiculous! And yet - the banking systems of both the US and UK are effectively bankrupt, so I'm simply riding a bear market rally, and then cashing out.

I wouldn't touch bonds, though.

I read alot about the financials - I feel I have an understanding - and despite this massive financial crisis my entire losses since July 2008 are 1%. Beats the crap out of most funds.

And yet the dangers so ingrained in the current crisis means no investment strategy is safe - manage your risks, and don't over stretch. Nothing else matters.

And tell your teacher this if you will.

Whoah Brian! I haven't visted for a while as I have been doing my best not to lose my shirt... my shorts have worked out but only enough to kill my losses, but you sound like you are really ticked off... capitulation maybe..... or a 5000 Dow?

On the one hand, I'm just pointing out that the fundamentals are screwed so normal criteria don't apply.

And, yes, I sold in panic on March 5th, thinking we were going over a cliff again and that the Dow was heading to 6,000 flat. If I had held, two weeks later as the financials rallied, I would have been almost even again.

I really hate myself for panicking and losing out, but I guess it's all just part of the experience, and I am bloody certain that I am going to make it all back again.

Am going to wait around, predatory style, on the grounds that we're currently looking at a bear rally, and that later this year or into next, we'll see a real bottom in this rally. When I think I see that bottom, I'll put a lot in.