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Investors urged to expand portfolios

09 March 2006
Investors in the stock market are being urged to exercise caution and extend their portfolios over as many asset classes as possible.

Bestinvest Brokers says that after three years of consistently strong stock market performance, consumers should be wary of becoming complacent with their stocks and shares ISA allowances.

Although the recent boom in asset prices has been matched by a decline in volatility, the driving force behind the strong results has been liquidity.

But Bestinvest is reminding investors that much of this liquidity in the UK and US economies has been created through taking on record levels of debt.

Recent figures in the UK have shown that the level of debt is getting out of control, topping £1.1 trillion and leading to record home repossessions and bankruptcies as cash-strapped consumers fail to meet repayments.

In the 1990s a high number of repossessions had the knock-on effect of a sharp fall in house prices, and this coupled with weak consumer spending figures could similarly hit asset prices.

Graham Frost, Bestinvest's chief investment officer, is also warning that the level of consistency across the asset classes is "unusual" and likely to prove a "short term phenomenon".

He continued: "It is vital investors spread their portfolios across a wide range of assets to provide some protection against one or more of the popular asset classes taking a tumble in future."

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