Hi Tom - and Adam, Re: Cash build-up in AIM managed accounts.......
Thanks for your cautionary notes of guidance Tom, and Adam's note is useful too. My cash levels are mostly generous by comparison with the VWave for diversified funds - 40-50%. At the moment I'm determining the target cash levels by looking at the % fall from the current price to the 2009 low. In some cases this has now risen to 50% or more, less for Europe ex-UK and Japan. Specifically:
UK FTSE All-Share 47%
UK FTSE 250 54%
S&P 500 tracker (in GBP) 47%
Europe ex-UK 34%
Asia-Pacific ex-Japan 52%
Japan 36%
Emerging Markets 52%
Gold miners 54%
I would only consider a Vealie where the actual cash level is above these. If the markets correct these figures will come down accordingly. The recent run up, the facts that we are close to major resistance, and that the current cyclical bull is getting long in the tooth, all suggest that protecting profits should be the priority at the moment.
The 2009 lows give clear-cut major support levels for the moment, but the time will come when these are no longer so relevant, and it isn't obvious (to me anyway) how to determine the appropriate cash levels for non-US markets, to which the VWave doesn't apply (although there's a high degree of correlation between various global markets, apart from Japan). There's also the question of determining appropriate cash levels for bond funds - perhaps using current yields versus historic averages (nominal and/or real), or yield support levels - the answer could be quite high at the moment, if you want to bother at all!
Best wishes,
Daisy.
