2007 – 2008

The Credit Crunch

The Credit Crunch is perhaps the financial crisis that we are all most familiar with – and a critical factor in causing that crisis was – you guessed it – a financial bubble.

Alongside increasing risk-taking by banks, the burst of the housing bubble in 2007 rapidly led to a full-blown banking crisis now synonymous with the collapse of the investment firm, Lehman Brothers, on 15 September 2008.

The effects were felt globally. Yet despite these very turbulent times, the point remained clear: investors were wise to steer clear from speculating in the latest ‘trend’ and instead the benefits of a well thought through investment strategy prevailed.


The United States housing bubble

The United States housing bubble peaked in early 2006 and was caused by a melting pot of financial and political issues from historically low interest rates to failures of regulators to intervene.

But as with any financial bubble a key characteristic was speculative fever: Americans were desperate to invest in the housing market and were encouraged further by government policies looking to promote affordable home ownership.

Many felt that investing in home ownership was risk-free and people rushed to become investors in property.

At the same time there was a rapid increase in the number of mortgages approved for high-risk borrowers. The consequence being, when interest rates rose and house prices fell, many were unable to pay their mortgages.


If you had invested £10,000 in June 2001 in to one of our portfolios it would now be worth £56,526. That’s compared to £14,033 if you had left it in a deposit account.

Over 17 years that’s either a 40.33% return by leaving it in cash, or a 465.26% return by investing in our portfolio – and all regardless of the Credit Crunch.