Investment Insights
Investments do rise and do fall in value and we strongly advise that professional advice is taken before investing your money
Brexit is unfortunately proving to be a very good example of intelligent people being unable to plan!
What we have witnessed since June 2016 has been painful to say the least and clearly demonstrates that as a group, the Westminster elite, don’t know what they are doing and clearly have no plan. You have one side saying ‘jump!’ and yet they can’t seem to tell you what tomorrow will look like. And then you have the other side reassuring you that staying joined to Europe is the only path to success and leaving would be cataclysmic. You simply cannot make it up, and you would laugh if you were not so concerned that it was going to affect your financial future. So, what can we learn from the Brexit debacle…? Planning is where you have a start, middle and finish. The start is where you identify your goals, the middle is were you put in the hard work and the finish is where you reap the rewards. Brexit currently is reflecting the current state of the masses, where people aimlessly wander nowhere, because they do not know what they want from life and how to get there. My advice is don’t let your life reflect the Brexit muddle, have a purpose and a goal and enjoy your life, after all this is not a dress rehearsal this is the real thing! 20/9/2018 The end is nigh..?For the speculators out there, they are always worrying if the stockmarket is going to drop/ collapse/crash, I even heard a respected Fund Manager who is a regular guest on CNBC (business channel) say that he is ‘dancing nearer to the doors these days’… I would like to suggest that if you are an investor and not a speculator, there is sufficient data and real experiences to suggest that worrying about short term volatility is a fool's game. In fact, investors like Warren Buffet are not ‘dancing near the door’, rather they would be relishing the opportunity of buying assets more cheaply if the chance was to become available. They see low prices as an opportunity, a chance to buy more of what they like at a good price as opposed to selling at a loss. Investors have often been referred to as lemmings, meaning that on the whole everyone tends to follow the herd, without thinking rationally. The stock market seems to be the odd situation where if you can buy something at a lower price than previously quoted then it’s no longer a good investment, but surely if it was a good investment before and you can buy it at a lower price then it’s potentially better value now! The unfortunate fact is that the human psyche struggles with this concept when it comes to investing. The stock market is like Jekyll and Hyde and regularly swings between euphoria and despair. Recognising this fact and not panicking can be part of the path to long-term success! Yes, the stock market is reaching the ‘mature’ part of this economic cycle, but I would suggest that as this recovery has been manipulated since the Financial Crisis by quantitative easing etc, therefore this cycle is not ‘normal’ by definition. Yes, many things can and do go wrong resulting in sudden market drops, but my view is that at this time, due to the cost of money being low and central bank interventions currently ongoing, this bull market has still more time to run. In fact a good piece of evidence supplied by Invesco Perpetual as presented to investment professionals says that it is not until the US yield curve has inverted that history shows that a recession is approaching, I quote, ‘However, the lead time between yield curve inversion and the start of recession tends to be quite long: 21 months, on average, over the last five US recessions. Furthermore, there is also a lag of 18 months, on average over the last five recessions, between yield curve inversion and the peak of the equity market; and the capital returns from the S&P 500 Index during that period have been strong (24.3%, on average). Past performance is not a guide to future returns.’ So as always this is not necessarily how things are going to evolve, but this research does indicate until this happens in relation to the S&P 500 index there is likely to be more gains to be achieved, before ‘a recession removes the weak holders and the strong take back their market share’ ready for the next business cycle and in terms of protecting ones portfolio, a move or increase in fixed interest or more value based funds would offer some potential downside protection or even upside wins. We at SMA continually review academic research and see what relevance this has to our client’s portfolios and are ready to change strategy as and when the economic back drop/investment style changes. If you would like to discuss how we may be able to add value to your portfolio, please do contact us. Author Steven Mufti is a qualified investment professional and this review is relevant at the time of publication. We do strongly recommend that you take professional advice before buying or selling any investment. 6/9/2018 Lower the risk of failure…Have you ever wondered WHY people seek financial advice?
Well, consider other areas of your life and whether you have ever needed the support of an expert to give you confidence – maybe you have had a health concern and consulted a doctor or perhaps you needed a new laptop and didn’t know where to start? The truth is that your financial affairs are no different and consulting with an expert is the best way of ensuring you make the best decisions for you and your family. So, what are the benefits to you of engaging with a financial adviser you may ask? Well, a good adviser will;
Studies have shown that when our brains process information more confidently, having received advice from an expert, this lowers the anxiety of failure and increases the feeling of being right and the confidence of future success. These points can be applied to lots of areas of your life, not just your finances. The important takeaways are to always know what you want to achieve and to build a plan to achieve your goals. 5/7/2018 Sharing the Love...What is your money worth to you? Let me explain what I mean with a bit more detail.
I was sitting around a friend’s house with our respective families, laughing and joking, you get the scene…then the remark - ‘that dog costs me £50 pm in dog insurance’ and as my friend is mathematically minded, he tells me - 'that’s £600 p.a. and after 10 years £6000!'. For many people their pet is an important member of the family, in fact 45% of households have a pet (statista.com) and they want to ‘share the love’ by making sure that they can provide for them if their pet became unwell. Now, if you turn this love around 180 degrees and look at the pet’s owner and their family, it may surprise you to know that we often see that the main 'bread winner' whom all the family’s future and security is dependent upon… for food, education, home, holidays, retirement etc is largely either not insured or underinsured! So why is the family pet so important? And the breadwinner not?? After all, if YOU had a money tree at the bottom of your garden YOU would protect it, wouldn’t you? How would you cope if something happened to your ‘money tree’? My message here is simple, if you love your family as much as your pet, ‘share the love’ and make sure that they have a future even if you are not around to share it. SMAssociates are passionate in helping our clients to have a better future based on maximising their savings and investments, be it to pay for private education, retirement or other life events. However, we believe that most people also want to provide for loved ones if they ‘don’t make it!’. Don’t underestimate what the price of a Starbucks coffee a day can make to your family’s future let alone your family Pet. Congratulations, you have just sold your business for a large capital amount, won the lottery or Inherited a large estate, but the sum involved is more than £5 million. You have paid the taxes due (don’t worry we may be able to legally claim some of that money back) and the question is now ‘how do I secure mine and my family’s future’.
A large sum of money is very daunting, if you have been a business owner you have been used to dealing with large sums of money on a regular basis. But all of a sudden, your whole financial future depends upon the decisions you now make. As a business owner you will probably be surrounded by professional advisers such as accountants, lawyers and even a financial adviser, so the likelihood is that you will turn to these individuals in the first instance, but you are now asking ‘do they have the skill and knowledge to manage and advise me on my capital’. A ‘family wealth office’ can have one client or several very high net worth clients. These individuals or families ‘employ’ by appointing a professional advisor to advise and manage their capital. By definition these high net worth clients are deemed professional and non-retail clients and they forgo their rights to the financial services compensation scheme (FSCS). The reason that they do this is primarily so that they can make full use of tax structures on and off shore, and access non-mainstream assets. Depending upon the clients remit and experience no investment vehicle is off the radar, but this is not always advisable. The best investors in the world are said to be the Endowment funds of the likes of Harvard and Yale universities, etc. They consistently achieve above inflation returns on their ‘portfolios’ due to their ability to invest ‘patiently’ for the long term. As a broad statement they invest a large portion of their capital in ‘Alternative’ assets which can mean ‘anything’ but generally could be termed; private equity or venture capital. The advantage to an investor is that if you put a portion of your capital into a private equity (small venture) and it is successful your returns can be multiplied many times over, the negative point is that you can lose the lot! This is why access to a group of suitable professionals is prudent as they can assess the risk and return parameters that you are prepared to take or should take, typically based on income and lifestyle needs and the time that the monies would be invested. They will construct a strategy to meet a said objective, also building in the needs for children (such as schooling, future homes etc) and grandchildren, to have a multi generation investment and tax strategy. Once you have the plan established the input of tax planning accountants are brought in to the plan along with solicitors to build the legal frame works, such as trusts and special purpose vehicles. Once the tax structures have been established to minimise tax and cash flows (incomes) are known, then the investment of capital can be implemented, segmenting the capital to target specific goals/objectives and then asset allocation of this capital to investments targeting the required returns/yields. The above is a broad example of what could be achieved, but the most important thing to do is to appoint an adviser who understands how to invest capital and fully understands your requirements. Do not expect to achieve this at one meeting, it could even take months and years before the first investment is undertaken, particularly if your investment experiences are limited. We here at SM & Associates do offer bespoke planning for ultra-high net worth individuals, do please call us if we can be of assistance. 31/5/2018 Congratulations to Harry & Meghan…Now, if Harry and Meghan should want me to advise them on how best to plan for their financial future, I would be happy to oblige and I would start by saying;
Rule one, decide who is going to be boss - we all know who is going to be the boss, don’t we chaps! But in seriousness, who in the partnership is good with money and is going to make the hard ‘money’ decisions? Too many couples have separate finances and therefore may not be working to a common goal, think about it, when was the last time you talked and planned how you are going to spend your money, let alone save for your future. Rule two, decide what the future is going to look like – Palace in Kensington, little white cottage in the countryside, holidays, 2.4 kids, education etc. What does Retirement look like? debt free, feet up, sipping a nice cool drink on a beach somewhere, or something completely different - set your goals! Rule three, don’t forget rule number two - the 'goal', build a plan and stick to it. Yes, life gets in the way, but the plan can be adapted as your priorities change. Like most diet plans, most people give up, but those of us who have a ‘real dream’ as opposed to a ‘wouldn’t it be nice’ dream, are more likely to make it successful and be in a better financial position. Some people are just lucky, they get that great job, buy the beautiful house, live happily ever after… but for the rest of us, we must work hard and stay focused on our goals, and slowly grind out the plan, making sure we stay on course. Life is tough but for those of us who want to live like a Duke and Duchess, making the most of our money and your opportunities, with the ones we love, we must Plan, Plan, Plan and Review, Review, Review! Sit down with your chosen adviser and then build your own dream (goals), because when you have started with goals that matter, soon the snowball effect should start to take effect. Retirement planning is a lot like gardening, you need to plan, start early and be flexible when things don’t work out as planned. SM&A are experts in helping clients plan and we say, start today, don’t delay! It’s amazing how many people just do not pay any attention to their pension funds, and what they don't realise is that they are likely losing money, by not doing so. The following is WHY people should take action TODAY;
The simple reality is that most people will not have enough saved to leave work when they want to and then live on their ‘accumulated wealth’ without seeing a fall in living standards. This article is not about how and when you should start aggressively saving (clue), but how to optimise what you have already accumulated through effective asset allocation. Asset allocation you say? What we need to understand is that it is primarily the asset you buy which determines the return you achieve, not the fund. We advise our clients which assets are likely to offer the best potential growth going forward and then guide them on how to invest across those assets based on the risk that they are prepared to take. Now, no one asset class will be the 'top-performer' at all times and this is why we embrace a strategy which is DIVERSIFIED, that way you don't 'put all your eggs in one basket'. Much is debated within the investment community about 'passive' funds versus 'active' fund management, and for those of us who have studied this subject in detail, we will typically use for a high net worth client a mixture of the two as we know that it’s the asset class you buy that is important not the product. The fund management business is great at inventing products, it is now said that there are more types of passive (index) funds than stocks - I rest my case! All this ‘noise’ does not help you as a consumer and it detracts a lot of people from making the jump into taking action! We are interested in serving our clients and optimising their returns - that’s what gets us through the door and this is why clients choose to stay with us. At SMAssociates we believe in focusing clients' portfolios on assets that offer them a greater potential return, whilst balancing in terms of risk and reward, i.e. why take more risk for no greater return when it is possible to take lower risk for the same return (optimisation). If people do not maximise their returns, then the simple fact is that they will have to save MORE! Our methodology is that we carefully select which assets we believe offer our clients the potential for future returns and then match our research with the best solution be it an 'active' fund or 'passive' fund for each asset class - this is the foundation of a client's portfolio. We then consider volatility in terms of the client's investment journey and on a continuing basis we REVIEW, REVIEW and REVIEW our client's portfolio returns and risk taken, making adjustments along the journey to reflect our client's goals and risk. It’s the art of blending the correct asset with the appropriate fund that helps our clients in achieving their bench mark goals. |
AuthorSteven is a Fellow of the Personal Finance Society, whom is passionate about investing and getting the most from your money. Archives
February 2024
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Steven Mufti & Associates Ltd is authorised and regulated by the Financial Conduct Authority.
Financial Services Register Number 607613. Registered in England & Wales, Company number 8664240. Registered Office address: 27 Armitage Court, Ascot, Berkshire, SL5 9TA. Telephone: 01344 623811 Email: advice@smawm.co.uk The guidance and or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted to customers in the UK. The FCA does not regulate taxation advice. The value of your investments may fall as well as rise. Financial Conduct Authority register: https://register.fca.org.uk/ShPo_FirmDetailsPage?id=001b000000NMlk7AAD |
22/3/2019
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