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Saturday November 18th, 2017 

News Archive - October 2009

Which way forward?

01/10/2009

The FTSE100 index has risen by around 17% over the 3 months to 30 September 2009, which is the biggest 3 month rise in the last 25 years. The FTSE100 is higher now than it was 12 months ago. This is irrespective of the fact that the UK economy is still in dire straits and that there are little or no signs of any 'green shoots of recovery'.

This is another example of the fact that it is very hard, if not impossible, to consistently 'time the market' by selling equities when you feel that they are going to fall in value and then re-buying them at the bottom of the market.

If you buy and hold equities then you will experience all of the losses as well as the gains, but historically this has still given better returns than cash over the long term.

Anybody who uses a 'lifestyle' strategy and switches gradually out of equities in the years before retirement will avoid any last minute stock market falls.

Unfortunately, the vast majority leave their pension funds fully invested in equities right up until they retire, so they are currently caught in a trap of checking the value of their funds from day to day and having to make the decision of when to retire, with potentially thousands of pounds riding on the decision.

If you want to take some professional advice on your retirement, give Mulberry Financial a call.

 

Cash is King?

14/10/2009

Several of my clients have recently referred to cash savings as a safe alternative where "they can get 5% interest a year with no risks", in comparison to equity investments where capital is at risk.

This 5% return may have been true a couple of years ago but the investment world has changed since then. The truth of the matter is that the best instant access accounts are currently paying not much more than 3% p.a gross. The best Cash ISAs are offering 3% p.a. And the only way that you can get anywhere near 5% p.a gross is to lock your money away for at least 4 years. This is a big commitment and might not fit in with your future plans.

The above rates are quoted gross so the net figures (excepting the ISA which is tax free) would be 20% worse for a basic rate taxpayer (3% p.a becomes 2.4% p.a) and 40% worse for a higher rate taxpayer (3% p.a becomes just 1.8% p.a).

These are the best rates available NOW for new accounts - in practice many people will have their money in older, less competitive accounts giving even worse returns.

The truth of the matter is that cash returns at present are barely keeping up with inflation. Some pension funds investing in cash (Money Market funds) are actually falling in value because the interest returns are exceeded by the annual fund management charge.

Cash is always going to be the favoured investment for those who have a small nestegg, because it is easy to understand and easy to access. However, for those who have a larger pot of savings, and are investing for the medium to long term, holding everything in cash at this point in time seems like a bad call. Diversifying, or moving some of your savings into other areas, spreads the risk and gives you the chance to exceed the current low cash returns. Other investment vehicles can also have additional tax advantages.

Call us for a free meeting at Mulberry Financial in Macclesfield where we can explore your options.


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The material here is for general information only and is not intended to be relied upon for individual investment decisions. Appropriate independent advice should be obtained before making any such decisions. Mulberry Financial Ltd does not accept any liability for any loss suffered by any user as a result of any such decision.
The information is based on our understanding of current HMRC rules and practices (as at the news article date) which are always subject to change. Taxation and trust advice and Cash ISAs are not regulated by the Financial Conduct Authority. This site is aimed at UK residents only.
Please remember that the prices of shares and other investments can fall sharply. You may not get back the money you originally invested. Past performance is not necessarily a guide to the future.


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