Investment Special: On the defensive

These are dark days for investors. Interest rates squat at historic all-time lows in order that the Bank of England can continue to bail out our errant banks and government. Western economies toil under a monumental burden of public and private-sector debt, to which austerity is merely the latest desperate political response. Securities and currency markets are all being manipulated by extraordinary and highly inflationary monetary stimulus. Safe havens, anyone?

The situation is doubly challenging for anyone in or approaching retirement. By artificially suppressing the yields available on UK government bonds or gilts, and therefore annuities, through its absurd policy of quantitative easing (a.k.a. money printing), the Bank of England has done an excellent job of further enriching the banking lobby whilst impoverishing those least able to add to their investment pot.

But the kneejerk response to the challenges of our time should not simply be to plunge without reservation into the stock market and hope for the best.