@Rob7Lee - thanks for that. I have an FA and will be chatting to him about all my options in due course.
As I understand it I can take 25% of my pot tax free but can take it as a salary if you like per month and not a lump sum and meanwhile the portion left will still be invested meaning that my 25% tax free will actually increase in value itself.
However this pension malarkey is a minefield and as someone who has always worked in the financial sector and finds it confusing it must be even more confusing for Joe Bloggs.
@Rob7Lee - thanks for that. I have an FA and will be chatting to him about all my options in due course.
As I understand it I can take 25% of my pot tax free but can take it as a salary if you like per month and not a lump sum and meanwhile the portion left will still be invested meaning that my 25% tax free will actually increase in value itself.
However this pension malarkey is a minefield and as someone who has always worked in the financial sector and finds it confusing it must be even more confusing for Joe Bloggs.
@Rob7Lee - thanks for that. I have an FA and will be chatting to him about all my options in due course.
As I understand it I can take 25% of my pot tax free but can take it as a salary if you like per month and not a lump sum and meanwhile the portion left will still be invested meaning that my 25% tax free will actually increase in value itself.
However this pension malarkey is a minefield and as someone who has always worked in the financial sector and finds it confusing it must be even more confusing for Joe Bloggs.
No worries @LargeAddick , it's generally straight forward just they change the rules every other year!
worth looking at what you can still invest once drawing as if it is still £10k better off doing that as immediate 20% growth (due to tax), also using up your spouses allowance, depends what pension she has herself but no point you paying tax on pension income if she's not using up her full tax free allowance. As a minimum she wants to be getting the £11,500 a year in pension.
IFAs are tricky things aren't they? If they pitch up in some old banger you think they must be crap at their job if they can't even sort out their own finances. If it's some smart, expensive motor then you think their fees must be too high! So, what's the ideal IFA car? I'm going for a Toyota Auris in platinum bronze. (Platinum bronze is a posh-sounding name for taupe.) I might listen to an IFA who arrived in an Auris.
@Rob7Lee - she won't be able to draw her pension for over three years after I start drawing mine and as I will still be working then yes I will use whatever tax free allowance of hers that I can.
IFAs are tricky things aren't they? If they pitch up in some old banger you think they must be crap at their job if they can't even sort out their own finances. If it's some smart, expensive motor then you think their fees must be too high! So, what's the ideal IFA car? I'm going for a Toyota Auris in platinum bronze. (Platinum bronze is a posh-sounding name for taupe.) I might listen to an IFA who arrived in an Auris.
Information below if anyone's interested in the latest analysis by GMO of where there is value in the markets for longer term investors over next 7 years. If you believe in experts they are reckoned to be up there, they called the 2000 and 2008 market crashes.
US is overvalued by 43% so little scope for long term gains and expected to fall in real value (after inflation) by -4% p.a over next 7 years Emerging Market equities - Over same period real increase of +7% p.a UK and Europe positive, Japan negative.
GMO assume equity returns always tend towards the long term average real return of 6.1% p.a. Most investor assume shares will grow from wherever they are at the moment and don't have the information showing how much of the current price is formed of unsustainable multiples.
The 6.1% long term average is made up of 3.4% dividend growth, 2.4% capital growth and a small margin added by market sentiment. If shares are paying the average dividend of around 3% but boosted by a 12% annual capital growth it means you are paying 12% more a year later for exactly the same asset, it cannot be sustained and eventually, but no one knows when, the tide will turn, the price will revert to fair value. At present, US equities are reckoned to be in that space by GMO. Irony is that GMO are losing business because they are underweight in US shares as they reckon they are overvalued, but the market has continued to rise as investors continue to pile in and their performance has lagged as a result. JP Morgan see no indication of an imminent fall in the US equity market, GMO would say yes, but it can't continue to rise. It highlights how unless you define your time horizon you can justify polar opposite views of markets.
Private markets (invest in infrastructure, private finance, roads schools etc, real estate and directly in businesses) are the new must have investment with high charges but a track record of high returns, 12% p.a + before charges. Only half a dozen reputable firms operate in this complex market and aimed mainly at institutional investors but there are retail funds that allow access, but must be diversified.
IFAs are tricky things aren't they? If they pitch up in some old banger you think they must be crap at their job if they can't even sort out their own finances. If it's some smart, expensive motor then you think their fees must be too high! So, what's the ideal IFA car? I'm going for a Toyota Auris in platinum bronze. (Platinum bronze is a posh-sounding name for taupe.) I might listen to an IFA who arrived in an Auris.
depends who your clients are.....if they are professionals with decent incomes then a Jag is quite acceptable, but if they li
Information below if anyone's interested in the latest analysis by GMO of where there is value in the markets for longer term investors over next 7 years. If you believe in experts they are reckoned to be up there, they called the 2000 and 2008 market crashes.
US is overvalued by 43% so little scope for long term gains and expected to fall in real value (after inflation) by -4% p.a over next 7 years Emerging Market equities - Over same period real increase of +7% p.a UK and Europe positive, Japan negative.
GMO assume equity returns always tend towards the long term average real return of 6.1% p.a. Most investor assume shares will grow from wherever they are at the moment and don't have the information showing how much of the current price is formed of unsustainable multiples.
The 6.1% long term average is made up of 3.4% dividend growth, 2.4% capital growth and a small margin added by market sentiment. If shares are paying the average dividend of around 3% but boosted by a 12% annual capital growth it means you are paying 12% more a year later for exactly the same asset, it cannot be sustained and eventually, but no one knows when, the tide will turn, the price will revert to fair value. At present, US equities are reckoned to be in that space by GMO. Irony is that GMO are losing business because they are underweight in US shares as they reckon they are overvalued, but the market has continued to rise as investors continue to pile in and their performance has lagged as a result. JP Morgan see no indication of an imminent fall in the US equity market, GMO would say yes, but it can't continue to rise. It highlights how unless you define your time horizon you can justify polar opposite views of markets.
Private markets (invest in infrastructure, private finance, roads schools etc, real estate and directly in businesses) are the new must have investment with high charges but a track record of high returns, 12% p.a + before charges. Only half a dozen reputable firms operate in this complex market and aimed mainly at institutional investors but there are retail funds that allow access, but must be diversified.
Watched 2 webcasts this week from 2 different fund management groups. One has said that global equity markets still look strong & can see growth from US, Europe & Emerging markets. The other was trying to promote their Absolute Return fund (for those un-initiated, these funds aim to give growth in all market conditions, even those which are falling). Over the last 3 years (since the new fund manager took over) the fund has seriously underperformed the market. The fund manager says that the fund has 4 main areas in which it aims to get growth, but all 4 "bets" have failed to pay off - I expect he is paid a tidy sum to get it wrong so often.
Ha. More than most threads, this one deserves to be read with a clear head, i.e not after drinking a bottle of 9.5% Baltic beer, as I did last night.
Finally got on top of @Dippenhall excellent post. Who are GMO, Dipps?
I have also now realised that @Webbja77 wasn't on a wind-up, nor was he trading in an obscure commodity :-). So Nutmeg invests in ETF's. I had never heard of Nutmeg before, how long have they been in existence? They seem to imply that they are active managers of your money, so not a direct alternative to Vanguard, or using Hargreaves Lansdowne to build your own portfolio.
Ha. More than most threads, this one deserves to be read with a clear head, i.e not after drinking a bottle of 9.5% Baltic beer, as I did last night.
Finally got on top of @Dippenhall excellent post. Who are GMO, Dipps?
I have also now realised that @Webbja77 wasn't on a wind-up, nor was he trading in an obscure commodity :-). So Nutmeg invests in ETF's. I had never heard of Nutmeg before, how long have they been in existence? They seem to imply that they are active managers of your money, so not a direct alternative to Vanguard, or using Hargreaves Lansdowne to build your own portfolio.
A Boston-based institutional money manager formerly known by the less snappy name, Grantham Mayo Van Otterloo.
Ha. More than most threads, this one deserves to be read with a clear head, i.e not after drinking a bottle of 9.5% Baltic beer, as I did last night.
Finally got on top of @Dippenhall excellent post. Who are GMO, Dipps?
I have also now realised that @Webbja77 wasn't on a wind-up, nor was he trading in an obscure commodity :-). So Nutmeg invests in ETF's. I had never heard of Nutmeg before, how long have they been in existence? They seem to imply that they are active managers of your money, so not a direct alternative to Vanguard, or using Hargreaves Lansdowne to build your own portfolio.
A Boston-based institutional money manager formerly known by the less snappy name, Grantham Mayo Van Otterloo.
Surely, no one any good at making decisions would base themselves in Boston?
Ha. More than most threads, this one deserves to be read with a clear head, i.e not after drinking a bottle of 9.5% Baltic beer, as I did last night.
Finally got on top of @Dippenhall excellent post. Who are GMO, Dipps?
I have also now realised that @Webbja77 wasn't on a wind-up, nor was he trading in an obscure commodity :-). So Nutmeg invests in ETF's. I had never heard of Nutmeg before, how long have they been in existence? They seem to imply that they are active managers of your money, so not a direct alternative to Vanguard, or using Hargreaves Lansdowne to build your own portfolio.
A Boston-based institutional money manager formerly known by the less snappy name, Grantham Mayo Van Otterloo.
Surely, no one any good at making decisions would base themselves in Boston?
What's your opinion on enterprise investment schemes @golfaddick ???
Good for the tax relief (30%) but you should max out your ISA first, look at putting money in a pension & maybe even an investment bond (depending on your tax rate) before looking at VCT's or EIS schemes. Everybody's situation is different but an EIS is more of an esoteric investment & not to be taken lightly.
What's your opinion on enterprise investment schemes @golfaddick ???
Good for the tax relief (30%) but you should max out your ISA first, look at putting money in a pension & maybe even an investment bond (depending on your tax rate) before looking at VCT's or EIS schemes. Everybody's situation is different but an EIS is more of an esoteric investment & not to be taken lightly.
No CGT on gains and any losses are also set off against income tax...
...however all predicated on holding for minimum 3 years and can thus be a pain on your tax return (eg if you claim relief and end up selling within 3 years).
IFAs are tricky things aren't they? If they pitch up in some old banger you think they must be crap at their job if they can't even sort out their own finances. If it's some smart, expensive motor then you think their fees must be too high! So, what's the ideal IFA car? I'm going for a Toyota Auris in platinum bronze. (Platinum bronze is a posh-sounding name for taupe.) I might listen to an IFA who arrived in an Auris.
depends who your clients are.....if they are professionals with decent incomes then a Jag is quite acceptable, but if they li
Information below if anyone's interested in the latest analysis by GMO of where there is value in the markets for longer term investors over next 7 years. If you believe in experts they are reckoned to be up there, they called the 2000 and 2008 market crashes.
US is overvalued by 43% so little scope for long term gains and expected to fall in real value (after inflation) by -4% p.a over next 7 years Emerging Market equities - Over same period real increase of +7% p.a UK and Europe positive, Japan negative.
GMO assume equity returns always tend towards the long term average real return of 6.1% p.a. Most investor assume shares will grow from wherever they are at the moment and don't have the information showing how much of the current price is formed of unsustainable multiples.
The 6.1% long term average is made up of 3.4% dividend growth, 2.4% capital growth and a small margin added by market sentiment. If shares are paying the average dividend of around 3% but boosted by a 12% annual capital growth it means you are paying 12% more a year later for exactly the same asset, it cannot be sustained and eventually, but no one knows when, the tide will turn, the price will revert to fair value. At present, US equities are reckoned to be in that space by GMO. Irony is that GMO are losing business because they are underweight in US shares as they reckon they are overvalued, but the market has continued to rise as investors continue to pile in and their performance has lagged as a result. JP Morgan see no indication of an imminent fall in the US equity market, GMO would say yes, but it can't continue to rise. It highlights how unless you define your time horizon you can justify polar opposite views of markets.
Private markets (invest in infrastructure, private finance, roads schools etc, real estate and directly in businesses) are the new must have investment with high charges but a track record of high returns, 12% p.a + before charges. Only half a dozen reputable firms operate in this complex market and aimed mainly at institutional investors but there are retail funds that allow access, but must be diversified.
Watched 2 webcasts this week from 2 different fund management groups. One has said that global equity markets still look strong & can see growth from US, Europe & Emerging markets. The other was trying to promote their Absolute Return fund (for those un-initiated, these funds aim to give growth in all market conditions, even those which are falling). Over the last 3 years (since the new fund manager took over) the fund has seriously underperformed the market. The fund manager says that the fund has 4 main areas in which it aims to get growth, but all 4 "bets" have failed to pay off - I expect he is paid a tidy sum to get it wrong so often.
You pays your money & you takes your choice.
They certainly get well paid for taking little risk.
Interesting you refer to "pays your money and makes your choice". We like to believe we make rational choices that optimise the prospects of getting what we want.
Behavioural science is now suggesting that when we make financial decisions we have the same biases as monkeys who are given choices about trading tokens for food. We are hard wired to put great store in the most recent experiences. If the outcome of the last action was bad, we take more risk next time to do better, and if the outcome is good, we are risk averse and carry on doing what worked last time. The thinking bit of our brain, that monkeys don't have, is suppressed, and we just can't bring ourselves to forego immediate gain for the prospect of a gain in ten years time, even though we know in the back of our mind we are taking a risk. The thinking part of our brain downplays the risk by thinking of reasons why it won't happen.
So all the time the US market is going up and all the indicators are that the economy is not heading for a recession, investors keep buying into it regardless of the price. The fact that we are paying in advance for the next ten years growth is either ignored or is not a consideration, and investors will believe that whatever the rise was for the last five years it will inevitably follow the same path for the next five years.
What "quantitive" analysis does, as provided by the likes of GMO, is provide the statistics that suggest whether assets are fairly priced at a given point in time and whether there is better value in other assets. The fact that there is little support for the idea that the US economy is ready to collapse into recession, means the stock market is not expected to suddenly crash, so managers will interpret that as "positive" for the US market. You must also factor in that managers are nothing if not pragmatic. Fund managers can't afford to bale out of the US market at the moment, as hitting their short term benchmarks depends on being heavily invested in the US, simply because the US makes up 60% of the global index the manager is measured against. Managers will leave it until the last minute and try and time their move with the market's movements purely to protect their performance figures, relative to the market. If the market goes down and their portfolio goes down by the same or a small degree, they will not have missed any target. The risk for the manager of selling out of overvalued assets too early can be disastrous for their short term performance record. Protecting their record is far more important than attempting to provide longer term value, and because of the behavioural issue, punters don't value the reward from sacrificing short term growth for long term gains anyway.
Incidentally, your Absolute Return manager probably said he would deliver a "gain" in a falling market, not growth. If the market falls 10% and the manager's fund only falls 5%, in his language he has made a "gain" for you. If the Absolute Return fund is targeting say cash + 4% that only makes sense as long term target, and it will always have periods of underperforming the equity market because it will deliberately sell out of a rising equity market in order to protect against the downside risks. Measuring an absolute return manager against a global equity manager over a short period is like matching up Mo Farah and Usain Bolt before you've decided how far they are going to have to race.
Back to P2P, if I may. I am very satisfied with my first year with three big players, Zopa, Ratesetter and Funding Circle. However I am getting worried about the increasing concerns expressed about the rapid rise in consumer debt. Initially I am thinking of gradually pulling money out of Zopa, because they keep buggering about with their offer for somewhat opaque reasons, but putting the money withdrawn into Funding Circle, which lends to businesses - and offers a higher return because of perceived higher risk.
Any comments on that? At present my P2P portfolio is about 13% of my total, but 60% is in cash, including Premium Bonds. I see a loss on my P2P as less likely than a stock market correction which would damage my unit Trust portfolio.
Back to P2P, if I may. I am very satisfied with my first year with three big players, Zopa, Ratesetter and Funding Circle. However I am getting worried about the increasing concerns expressed about the rapid rise in consumer debt. Initially I am thinking of gradually pulling money out of Zopa, because they keep buggering about with their offer for somewhat opaque reasons, but putting the money withdrawn into Funding Circle, which lends to businesses - and offers a higher return because of perceived higher risk.
Any comments on that? At present my P2P portfolio is about 13% of my total, but 60% is in cash, including Premium Bonds. I see a loss on my P2P as less likely than a stock market correction which would damage my unit Trust portfolio.
It's the retail investor's way of accessing the Private Debt market which now forms a small but important growth component of many institutional investment strategies. Institutional Private Debt is lending to business, not individuals and would regard lending to business as less risky than lending to individuals, as there is normally some security backing the loans. Anything that gives a consistent return above 6% p.a shouldn't be sniffed at. The attraction of private debt is that it does not correlate to equity market movements, which is the core principle of a diversified portfolio.
Given the uncertainty and the difficulty of finding value, holding cash is seen as a strategy of waiting until a better opportunity is identified.
Here is one long manager's idea of a defensive asset allocation in these uncertain times, but still with 40% in selective equity markets:
Cash - 26% Fixed Income - 16% (includes Private Debt and US Treasury) Alternatives (Hedging and arbitrage plays) - 16% Emerging Market equities - 25% Developed Equity markets (exc the US) - 14% High value equities - 3%
In an ideal world High Value Equities would be one of the biggest allocations for a long term investor, it shows the manager doesn't think there is much value out there. This manager is unlikely to be heading up any performance table in the near term while he is entirely out of the US market (60% of the market index), but that is not where he thinks there is a lot of reward over the mid to medium term.
For anyone not familiar with the Phillips & Drew saga, their top manager Tony Dye in 1995 said the UK equity market was overvalued at 4,000 and was bound for a correction and began moving clients into cash. The markets continued to storm ahead and by 1999 the index was over 7000. Philips & Drew's clients were leaving in droves, performance wise P&D ranked 66 out of 67 and Tony dye was sacked. A few days later the stock market began to fall until it crashed to 3,500. Only recently has the market reached 7,000 again. So those arguing that the stock market in the mid 1990s was going to deliver more returns were right, but they didn't point out you would have to wait 16 years.
Back to P2P, if I may. I am very satisfied with my first year with three big players, Zopa, Ratesetter and Funding Circle. However I am getting worried about the increasing concerns expressed about the rapid rise in consumer debt. Initially I am thinking of gradually pulling money out of Zopa, because they keep buggering about with their offer for somewhat opaque reasons, but putting the money withdrawn into Funding Circle, which lends to businesses - and offers a higher return because of perceived higher risk.
Any comments on that? At present my P2P portfolio is about 13% of my total, but 60% is in cash, including Premium Bonds. I see a loss on my P2P as less likely than a stock market correction which would damage my unit Trust portfolio.
It's the retail investor's way of accessing the Private Debt market which now forms a small but important growth component of many institutional investment strategies. Institutional Private Debt is lending to business, not individuals and would regard lending to business as less risky than lending to individuals, as there is normally some security backing the loans. Anything that gives a consistent return above 6% p.a shouldn't be sniffed at. The attraction of private debt is that it does not correlate to equity market movements, which is the core principle of a diversified portfolio.
Given the uncertainty and the difficulty of finding value, holding cash is seen as a strategy of waiting until a better opportunity is identified.
Here is one long manager's idea of a defensive asset allocation in these uncertain times, but still with 40% in selective equity markets:
Cash - 26% Fixed Income - 16% (includes Private Debt and US Treasury) Alternatives (Hedging and arbitrage plays) - 16% Emerging Market equities - 25% Developed Equity markets (exc the US) - 14% High value equities - 3%
In an ideal world High Value Equities would be one of the biggest allocations for a long term investor, it shows the manager doesn't think there is much value out there. This manager is unlikely to be heading up any performance table in the near term while he is entirely out of the US market (60% of the market index), but that is not where he thinks there is a lot of reward over the mid to medium term.
For anyone not familiar with the Phillips & Drew saga, their top manager Tony Dye in 1995 said the UK equity market was overvalued at 4,000 and was bound for a correction and began moving clients into cash. The markets continued to storm ahead and by 1999 the index was over 7000. Philips & Drew's clients were leaving in droves, performance wise P&D ranked 66 out of 67 and Tony dye was sacked. A few days later the stock market began to fall until it crashed to 3,500. Only recently has the market reached 7,000 again. So those arguing that the stock market in the mid 1990s was going to deliver more returns were right, but they didn't point out you would have to wait 16 years.
I worked at P&D for about 4 months in early 1998 - I believe the late Richard Collin's daughter worked there at the same time as well.
As for the US stockmarket. A presentation I attended last week hosted by Jupiter indicated that they still think US equities have some growth left in them & that a correction is not on the cards........yet. Corporate earnings are still strong & interest rate over there will now rise slower than originally thought.
I’ve slowly come out of Zopa over the last few years, returns aren’t that great anymore and it’s a bubble waiting to burst, gone are the days of 8-10% return. I’m pulling back on all of them, I like funding circle but don’t have the time anymore to do proper research.
Just been to a very informative presentation on the markets & predictions for the year ahead by well known fund management group.
Main issues were interest rates, market growth sustainability and the unwinding of QE (QT or Quantative Tightening). The things I took away with me (apart from the free pen & notepad) were the following:
US economy still strong & any recession is at least 18 months away & general prediction is mid 2019.
They have $3.5 trillion of QT, but the Fed is taking its time & will only do it if conditions are right.
Interest rate here are predicted to be no more than 1% (3 x 0.25% rises) by 2020 - the first one in early next year & probably not next month. BoE use different inflation figures to the published CPI and their rate is currently 2.4% and not the 3% published this week.
Emerging markets looking good & economic growth is getting better.
Cash is no good for "defensive" or "hedging" purposes and advisors (like me) have to be looking at alternative solutions (Gold ???) as the old days of going into fixed income is also tricky due to Gilt yields.
As the presenter said - the answer to any question regarding the US is Trump & to the UK is Brexit. Understand those & you can unravel the markets.
Just been to a very informative presentation on the markets & predictions for the year ahead by well known fund management group.
Main issues were interest rates, market growth sustainability and the unwinding of QE (QT or Quantative Tightening). The things I took away with me (apart from the free pen & notepad) were the following:
US economy still strong & any recession is at least 18 months away & general prediction is mid 2019.
They have $3.5 trillion of QT, but the Fed is taking its time & will only do it if conditions are right.
Interest rate here are predicted to be no more than 1% (3 x 0.25% rises) by 2020 - the first one in early next year & probably not next month. BoE use different inflation figures to the published CPI and their rate is currently 2.4% and not the 3% published this week.
Emerging markets looking good & economic growth is getting better.
Cash is no good for "defensive" or "hedging" purposes and advisors (like me) have to be looking at alternative solutions (Gold ???) as the old days of going into fixed income is also tricky due to Gilt yields.
As the presenter said - the answer to any question regarding the US is Trump & to the UK is Brexit. Understand those & you can unravel the markets.
Was it Fidelity? Had an invite for one today but couldn't make it.
Gold has been a fav of mine this year, although not ventured past sovereigns so far due to CGT etc.
Interest rates are interesting, I have a lump of cash coming next week but looks like I need to find a home outside of just cash if rates won't even be above 1% by 2020. I was hoping for 5% by then
Interest rates won't be much above 3% for at least 5 years.
Gold is a tricky one to hold - an ETF maybe ?
it wasn't Fidelity but don't want to say who it was either (no, I'm not going to play the guessing game ) Lets just say they are a mountain of a company.
Interest rates won't be much above 3% for at least 5 years.
Gold is a tricky one to hold - an EFT maybe ?
it wasn't Fidelity but don't want to say who it was either (no, I'm not going to play the guessing game ) Lets just say they are a mountain of a company.
Assume you mean ETF’s? I’m in pretty heavy on stocks & shares (a bit in bonds) already, outside of my own home probably 65%-70% (depending what the market does on any given day) of asset. Just cashed in a property as in the short to medium term I don’t see them appreciating much more, some gold and Jewellery/Watches, maxed out on premium bonds, the rest is pure cash. It’s the house money I need to decide on.
Interest rates won't be much above 3% for at least 5 years.
Gold is a tricky one to hold - an EFT maybe ?
it wasn't Fidelity but don't want to say who it was either (no, I'm not going to play the guessing game ) Lets just say they are a mountain of a company.
Assume you mean ETF’s? I’m in pretty heavy on stocks & shares (a bit in bonds) already, outside of my own home probably 65%-70% (depending what the market does on any given day) of asset. Just cashed in a property as in the short to medium term I don’t see them appreciating much more, some gold and Jewellery/Watches, maxed out on premium bonds, the rest is pure cash. It’s the house money I need to decide on.
Yes, now amended.
When I'm advising clients I would normally advise (in order) the following investments
S&S ISA Pension Collectives (unit trust / OEICs) Investment Bond (depending on tax situation) Structured Products VCT / EIS
there isn't a lot of choice when it come down to investing. Once you've done the cash on deposit stuff, Premium Bonds & any other NSI products available then pure investing is mostly down to tax situation (current & future) and time horizon. The risk element can be altered up & down in most of the above list. The only other investment is property (buy-to-let) but this means either a very large amount or a mortgage & a deposit of at least 20% (30-40% is better)
S&S Isa done for both my wife and I have done for a while.
Pension I’m pretty much done on although do pay the maximum allowable into my wife’s (basically her earnings less her work pension amount) to make sure upon retirement were using up her 20% bracket.
On BTL, as I say just sold a property. Although I don’t really view my own home as an asset as such it is in reality so have a lot tied up in that. Rental returns just aren’t worth the agg right now.
Comments
As I understand it I can take 25% of my pot tax free but can take it as a salary if you like per month and not a lump sum and meanwhile the portion left will still be invested meaning that my 25% tax free will actually increase in value itself.
However this pension malarkey is a minefield and as someone who has always worked in the financial sector and finds it confusing it must be even more confusing for Joe Bloggs.
worth looking at what you can still invest once drawing as if it is still £10k better off doing that as immediate 20% growth (due to tax), also using up your spouses allowance, depends what pension she has herself but no point you paying tax on pension income if she's not using up her full tax free allowance. As a minimum she wants to be getting the £11,500 a year in pension.
US is overvalued by 43% so little scope for long term gains and expected to fall in real value (after inflation) by -4% p.a over next 7 years
Emerging Market equities - Over same period real increase of +7% p.a
UK and Europe positive, Japan negative.
GMO assume equity returns always tend towards the long term average real return of 6.1% p.a. Most investor assume shares will grow from wherever they are at the moment and don't have the information showing how much of the current price is formed of unsustainable multiples.
The 6.1% long term average is made up of 3.4% dividend growth, 2.4% capital growth and a small margin added by market sentiment. If shares are paying the average dividend of around 3% but boosted by a 12% annual capital growth it means you are paying 12% more a year later for exactly the same asset, it cannot be sustained and eventually, but no one knows when, the tide will turn, the price will revert to fair value. At present, US equities are reckoned to be in that space by GMO. Irony is that GMO are losing business because they are underweight in US shares as they reckon they are overvalued, but the market has continued to rise as investors continue to pile in and their performance has lagged as a result. JP Morgan see no indication of an imminent fall in the US equity market, GMO would say yes, but it can't continue to rise. It highlights how unless you define your time horizon you can justify polar opposite views of markets.
Private markets (invest in infrastructure, private finance, roads schools etc, real estate and directly in businesses) are the new must have investment with high charges but a track record of high returns, 12% p.a + before charges. Only half a dozen reputable firms operate in this complex market and aimed mainly at institutional investors but there are retail funds that allow access, but must be diversified.
You pays your money & you takes your choice.
Finally got on top of @Dippenhall excellent post. Who are GMO, Dipps?
I have also now realised that @Webbja77 wasn't on a wind-up, nor was he trading in an obscure commodity :-). So Nutmeg invests in ETF's. I had never heard of Nutmeg before, how long have they been in existence? They seem to imply that they are active managers of your money, so not a direct alternative to Vanguard, or using Hargreaves Lansdowne to build your own portfolio.
...however all predicated on holding for minimum 3 years and can thus be a pain on your tax return (eg if you claim relief and end up selling within 3 years).
They certainly get well paid for taking little risk.
Interesting you refer to "pays your money and makes your choice". We like to believe we make rational choices that optimise the prospects of getting what we want.
Behavioural science is now suggesting that when we make financial decisions we have the same biases as monkeys who are given choices about trading tokens for food. We are hard wired to put great store in the most recent experiences. If the outcome of the last action was bad, we take more risk next time to do better, and if the outcome is good, we are risk averse and carry on doing what worked last time. The thinking bit of our brain, that monkeys don't have, is suppressed, and we just can't bring ourselves to forego immediate gain for the prospect of a gain in ten years time, even though we know in the back of our mind we are taking a risk. The thinking part of our brain downplays the risk by thinking of reasons why it won't happen.
So all the time the US market is going up and all the indicators are that the economy is not heading for a recession, investors keep buying into it regardless of the price. The fact that we are paying in advance for the next ten years growth is either ignored or is not a consideration, and investors will believe that whatever the rise was for the last five years it will inevitably follow the same path for the next five years.
What "quantitive" analysis does, as provided by the likes of GMO, is provide the statistics that suggest whether assets are fairly priced at a given point in time and whether there is better value in other assets. The fact that there is little support for the idea that the US economy is ready to collapse into recession, means the stock market is not expected to suddenly crash, so managers will interpret that as "positive" for the US market. You must also factor in that managers are nothing if not pragmatic. Fund managers can't afford to bale out of the US market at the moment, as hitting their short term benchmarks depends on being heavily invested in the US, simply because the US makes up 60% of the global index the manager is measured against. Managers will leave it until the last minute and try and time their move with the market's movements purely to protect their performance figures, relative to the market. If the market goes down and their portfolio goes down by the same or a small degree, they will not have missed any target. The risk for the manager of selling out of overvalued assets too early can be disastrous for their short term performance record. Protecting their record is far more important than attempting to provide longer term value, and because of the behavioural issue, punters don't value the reward from sacrificing short term growth for long term gains anyway.
Incidentally, your Absolute Return manager probably said he would deliver a "gain" in a falling market, not growth. If the market falls 10% and the manager's fund only falls 5%, in his language he has made a "gain" for you. If the Absolute Return fund is targeting say cash + 4% that only makes sense as long term target, and it will always have periods of underperforming the equity market because it will deliberately sell out of a rising equity market in order to protect against the downside risks. Measuring an absolute return manager against a global equity manager over a short period is like matching up Mo Farah and Usain Bolt before you've decided how far they are going to have to race.
Any comments on that? At present my P2P portfolio is about 13% of my total, but 60% is in cash, including Premium Bonds. I see a loss on my P2P as less likely than a stock market correction which would damage my unit Trust portfolio.
Given the uncertainty and the difficulty of finding value, holding cash is seen as a strategy of waiting until a better opportunity is identified.
Here is one long manager's idea of a defensive asset allocation in these uncertain times, but still with 40% in selective equity markets:
Cash - 26%
Fixed Income - 16% (includes Private Debt and US Treasury)
Alternatives (Hedging and arbitrage plays) - 16%
Emerging Market equities - 25%
Developed Equity markets (exc the US) - 14%
High value equities - 3%
In an ideal world High Value Equities would be one of the biggest allocations for a long term investor, it shows the manager doesn't think there is much value out there. This manager is unlikely to be heading up any performance table in the near term while he is entirely out of the US market (60% of the market index), but that is not where he thinks there is a lot of reward over the mid to medium term.
For anyone not familiar with the Phillips & Drew saga, their top manager Tony Dye in 1995 said the UK equity market was overvalued at 4,000 and was bound for a correction and began moving clients into cash. The markets continued to storm ahead and by 1999 the index was over 7000. Philips & Drew's clients were leaving in droves, performance wise P&D ranked 66 out of 67 and Tony dye was sacked. A few days later the stock market began to fall until it crashed to 3,500. Only recently has the market reached 7,000 again. So those arguing that the stock market in the mid 1990s was going to deliver more returns were right, but they didn't point out you would have to wait 16 years.
As for the US stockmarket. A presentation I attended last week hosted by Jupiter indicated that they still think US equities have some growth left in them & that a correction is not on the cards........yet. Corporate earnings are still strong & interest rate over there will now rise slower than originally thought.
Main issues were interest rates, market growth sustainability and the unwinding of QE (QT or Quantative Tightening). The things I took away with me (apart from the free pen & notepad) were the following:
US economy still strong & any recession is at least 18 months away & general prediction is mid 2019.
They have $3.5 trillion of QT, but the Fed is taking its time & will only do it if conditions are right.
Interest rate here are predicted to be no more than 1% (3 x 0.25% rises) by 2020 - the first one in early next year & probably not next month. BoE use different inflation figures to the published CPI and their rate is currently 2.4% and not the 3% published this week.
Emerging markets looking good & economic growth is getting better.
Cash is no good for "defensive" or "hedging" purposes and advisors (like me) have to be looking at alternative solutions (Gold ???) as the old days of going into fixed income is also tricky due to Gilt yields.
As the presenter said - the answer to any question regarding the US is Trump & to the UK is Brexit. Understand those & you can unravel the markets.
Gold has been a fav of mine this year, although not ventured past sovereigns so far due to CGT etc.
Interest rates are interesting, I have a lump of cash coming next week but looks like I need to find a home outside of just cash if rates won't even be above 1% by 2020. I was hoping for 5% by then
Gold is a tricky one to hold - an ETF maybe ?
it wasn't Fidelity but don't want to say who it was either (no, I'm not going to play the guessing game ) Lets just say they are a mountain of a company.
When I'm advising clients I would normally advise (in order) the following investments
S&S ISA
Pension
Collectives (unit trust / OEICs)
Investment Bond (depending on tax situation)
Structured Products
VCT / EIS
there isn't a lot of choice when it come down to investing. Once you've done the cash on deposit stuff, Premium Bonds & any other NSI products available then pure investing is mostly down to tax situation (current & future) and time horizon. The risk element can be altered up & down in most of the above list. The only other investment is property (buy-to-let) but this means either a very large amount or a mortgage & a deposit of at least 20% (30-40% is better)
but I'm not on here to give advice
Pension I’m pretty much done on although do pay the maximum allowable into my wife’s (basically her earnings less her work pension amount) to make sure upon retirement were using up her 20% bracket.
On BTL, as I say just sold a property. Although I don’t really view my own home as an asset as such it is in reality so have a lot tied up in that. Rental returns just aren’t worth the agg right now.
Will take a look at the others, cheers.