CHANGE YOUR PORTFOLIO FOR THE NEW YEAR!

If a client were to come to me now to invest his cash for him and to come up with an investment proposal, I would have a completely different outlook than what I had about 6 months ago.

My current selection would be as follows:
10% to 20% in equities
30% to 40% in bonds
10% to 15% in precious metals
This means that with as little as 50% invested to a maximum of 75%. The remaining would be in either cash or a money market instrument.

The rationale for this increased cash position is that it is becoming clearer that the Bull Run in equities is nearing its end. As you can never time it perfectly, I think that missing a little performance on the up side, for some added safety is prudent at this stage. The equity portion would be focusing in emerging markets, as you do not want to miss out completely in some economic growth that should continue.
I would hold or even increase a bond position at this stage as the rate cuts seem to be a given in the mid to near future so the value of the bonds should increase as these cuts come through. This would be more of a trading play (including an attractive yield) with a maturity period of approximately 2 years.
In terms of precious metals, at this stage you have to soberly look at the outlook. I for one, believe that gold will increase more and could go as high as 1000 or even 1200 but in a couple of years or in five years, the price could (and perhaps should) return to 500 or 600. This effectively means that on a trading basis I would hold some metals in the portfolio but would not be a gold bug just buying and holding. The clear strategy, in my eyes, is to sell when you have a profit of about 10% to 15% and to buy back in when there is a correction of about 10%. With the current movements being quite rapid, you should be able to do this about 3 times in a year.
With my cash position, I would use small investment opportunities to trade in options as and when they arise. In terms of currencies, I would expect that the USD would get even weaker but the weakness will start to slow and a new level should be found sometime next year (2008). This had 2 factors, the fact that this is an election year in the US and the markets should slow down in anticipation of this. The other factor is that at a certain stage, the remaining markets will also start to slow down (e.g. Britain) and it will not be USD strength but weakness of the other currencies. Lastly, the weakness should continue in the short term as the interest rate differential is closing while the FED is cutting rates and would take some time to stabilise.
In conclusion, the time has passed when you could have a 60% equity, 30% bond and 10% metals portfolio.