Many articles have been written about active versus passive management. Active management aims to outperform a benchmark (such as the FTSE-World Index) by careful sector and stock selection. Passive management simply replicates the index and tracks it up and down. An actively managed investment fund will typically cost c. 0.75% per annum. Passive funds are available for 0.10% per annum or less.
The fact is that these arguments miss the point. There is a place for both management styles in a diversified portfolio. The most important ingredient is active risk management (ARM).
I know a lot of financial advisers. It’s a terrible thing to say but I wouldn’t trust most of them with my kids’ pocket money. I don’t like the suits they wear.
I get the same uncomfortable feelings when I go into a car dealership or an estate agent. Or when I go into a shop or bar and that disinterested voice says “Are you alright there?”. What does that mean, anyway? Whatever happened to “May I help?” or “What can I get you?”.
When pensions freedoms were introduced in April 2015 the number of annuities being purchased fell dramatically. Flexibility and control were seen as by far the more attractive option, especially as annuity rates had dropped to such low levels.
For a healthy 65 year old couple, £100,000 will currently buy a guaranteed level annual income of c. £5,000. That means it will take 20 years just to get their money back (ignoring tax!).
What the annuity does provide, however, is an insurance policy against living longer than average.
For many years, Independent Financial Advisers have considered transferring benefits out of a Final Salary (Defined Benefits) Scheme to be a very bad idea. However deferred scheme members have seen transfer values (known as Cash Equivalent Transfer Values or CETV’s) rocket because of BREXIT, the fall in the value of sterling and the resulting fall in Gilt yields. This increase has meant that the decision on whether to transfer out of a Final Salary Scheme has become much more finely balanced.
The introduction of the Government’s Pensions Freedoms legislation on 6th April 2015 has changed the landscape completely. While...
I am starting to sympathise with Victor Meldrew. Since I turned 50 more and more things seem to drive me mad. I spoke to a client the other day who told me that pensions were a waste of time and the only sensible investment was residential property. So I ran through some figures...
In recent years, pension allowances and reliefs have gradually been squeezed. Further cutbacks are on the horizon and so, as the end of the tax year draws near, now is the time to take maximum advantage.
Pensions are still the most tax-efficient way to save for retirement - it doesn’t matter if you are self-employed, employed, a business owner or even retired.
In this second article in the series we will be focusing exclusively on investments. Investments are for the longer term – at least 5 years, as opposed to savings which are for the shorter term. Investments usually imply a degree of risk. The main reason for accepting risk is to try and achieve better returns than normal savings. That is important if you are trying to maintain and grow your money relative to inflation. As a saver, inflation is your enemy because it erodes the value of your capital.
Click here to read 6 top tips on how to make the most of your investments...
Thousands of baby boomers are now approaching their sixties. Having worked for around forty years, many are ‘tired and worn out’. They want to take life easier, work less hours or even retire altogether. Many clients tell us that they think they will have to ‘work until I drop’ and believe that taking early, semi or full retirement is only possible for the mega wealthy or those lucky enough to win the lottery.
In our experience and although everyone’s circumstances are different, this is not necessarily the case! Once the mortgage has been paid off and the children have flown the nest, the amount needed to live on in r...
With Christmas fast approaching the temptation to use your credit card(s) becomes more and more powerful. But next time you are tempted, make sure you appreciate the cost of what you are actually doing.
Credit card debt is again on the rise and although the Bank of England base rate is at an historic low, lenders have not seen fit to reduce the interest they charge their customers for using credit.
Budgeting for big ticket purchases and only spending what you can afford is the most prudent route, but when using credit, try and stick to some simple rules.
NS&I Index-Linked Certificates are tax-free, index-linked fixed term savings accounts (for 2, 3 or 5 years) which offer an inflation-proofed return plus a “sweetener” at a specific fixed rate. In the past, Certificates have offered rates of up to Index-Linking (RPI) + 1.35% but those days are long gone. The current rate for all terms (2, 3 and 5 years) is Index-Linking + 0.01%.
This headline rate seems pretty unexciting but with inflation currently sitting at 2%, the effective rate (2.01%) is actually very competitive.
Click here to read more about why you should cherish your linkers...