Category: Investment

Should I sell in May?

Summer is just around the corner, and with it comes an old saying in the world of finance: “Sell in May and don’t come back ’til St Leger’s Day.” This advice suggests that investors should sell their investments at the start of summer and reinvest in September. But is there any truth behind this adage,

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Should I invest in Private Equity?

Investing in private equity (PE) can seem like an exclusive club for the wealthy and well-connected. Let’s talk about private equity and its relevance to your investment strategy. We will explore the advantages and disadvantages in simple terms to showcase the impact of effective financial planning. What is Private Equity? Private equity involves investing in

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What is Loss Aversion and how could it affect my finances?

“Loss aversion” is a bias that can significantly influence how you manage your money. This concept was developed by the well-known psychologist Daniel Kahneman, who, along with Amos Tversky, identified this phenomenon in 1979. Kahneman’s research has shown that people feel the pain of losses more acutely than the pleasure of equivalent gains. Understanding this

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What Is Asset Location, and Can It Help Me?

As you build an investment portfolio, you probably consider your asset allocation and how that relates to your risk tolerance. But don’t confuse asset allocation with asset location, a straightforward process that could minimise taxes. It’s a simple yet powerful strategy you can easily incorporate into your investment planning. What is asset location? Different types of

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How do the recent changes to Bitcoin affect me?

The US Securities and Exchange Commission (SEC) recently approved a new investment fund focusing on Bitcoin, a popular digital currency. This move has sparked much discussion about investing in cryptocurrencies, known for their big price swings. What’s New? In January 2024, the SEC approved investment funds that directly follow the price of Bitcoin. These funds

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Should I listen to predictions about the markets?

Many analysts are making predictions about the markets and the economy. However, it’s essential to be aware of the limitations of these predictions before making any decisions. The Psychological Urge for Predictability: People tend to rely on market predictions because they prefer certainty over uncertainty. This desire for order and control results from our cognitive

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Should I Invest 100% in Equities?

The traditional approach for most has been to have a mix of growth assets, such as equities (stocks and shares), and defensive assets, such as bonds, within their portfolio. New research is challenging this approach. What does the research say? The research looked at the returns of various assets from 1890 to 2019. It suggests

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What is the size factor when investing?

Building on the underlying concept of factor investing, we’ve already explored the Value Factor and now it’s time to look at the Size Factor. What is the Size Factor All About? Think of the investing universe as a zoo, where companies come in different shapes and sizes. Some are powerful lions, while others are nimble

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What is the value factor when investing?

Factor investing simplifies investment decisions by following golden rules such as Value, Size, Momentum, Quality, and Volatility. Let’s focus on the Value Factor and how it helps your money grow over the long term. What is the Value Factor? When shopping, you might see two identical items priced differently. If one is £10 and the

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How can factor investing help me?

Back in the ’70s, an academic called Stephen A. Ross figured out a nifty way to give your returns a bit more oomph. He studied at famous schools like Caltech and Harvard and wrote a paper that changed how we invest. What did the paper say? He popularised “factor investing,” which simplifies investment decisions based

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Should I invest in AI?

Investors often lose sight of their long-term goals due to two main distractions: fear and hype. Fear, often brought on by global events or market downturns, can cause investors to focus too much on the short term. This can lead to hasty decisions that derail their long-term strategies. On the other hand, hype, which arises

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Do I need to invest in complex investments?

Some believe they need to invest in more complex financial instruments to get higher returns. However, it’s important to evaluate whether these investments are necessary and will help you achieve your financial goals. What are complex investments? Complex investments are financial instruments that are more intricate in nature, come with higher risks, increased costs, and

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What is home bias?

When providing investment advice, we may discuss the idea of home bias and its potential impact. Home bias describes the tendency for investors to put a larger portion of their portfolio into assets within their own country, like stocks and bonds. For example, a UK investor with a home bias would have a higher percentage

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How much risk is right for me?

If you want to invest, a top priority is determining how much risk to take. Risk might sound scary, especially if you’re not a risk-taker elsewhere. More risk can mean higher returns when investing, but nothing is guaranteed. Is having too much in equities a bad idea? The chart below looks at the probability of

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How long do I have to invest for?

Many wonder how long they need to invest their money. Like many others in life, the answer is “it depends.” While no two circumstances are identical, understanding the behaviour of the investment markets can help you make an informed decision. History also shows that the longer you invest, you increase your chances of making money

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Why don’t you try to time the markets?

We all wish we could outwit the financial markets. Instead of trusting them to produce life-changing returns, we fool ourselves into believing that we can predict when the market will fall and then rise again. No one is immune to this temptation, but we can cure ourselves of the desire to act on it. With a

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Should I invest in commodities?

Our colleagues at Timeline, who manage the portfolios we recommend to our clients, have put together a paper on the investment case for commodities. We class commodities as ‘alternative’ investments. Unlike ‘traditional’ assets such as bonds and equities, commodities are physical assets that produce no income and may incur storage and transportation costs. This makes

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What is factor investing?

Factor investing is a specific way to approach investing. This approach targets specific drivers of returns across asset classes and can help improve returns and enhance diversification. How does factor investing differ from traditional investing? When looking at investing styles, there are two ends of the spectrum. At one end, you have purely active managers.

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Is the default fund in my pension any good?

You might not be interested or feel comfortable in choosing where your retirement savings are invested. If this is the case, then it is likely you have the money in your pension invested into the provider’s default pension fund. We are never going to criticise providers for making it easier for people to invest their

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How can you spot a “dodgy” investment?

Earlier this week we highlighted a report looking at another case of investors losing vast sums of money. They had put money into investments that had little hope of producing the returns being promised to them. You should always be on the lookout for scams. However, the types of investments we are talking about here

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Am I better off picking my own funds?

Morningstar has published updated research as part of its annual Mind The Gap study on how much of market returns US investors get. The headline is those investors get 1.7% less than they should. What is the reason behind the difference? The explanation the report gives for this is that the investors mistime their buys

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How often should I look at my portfolio?

Your portfolio represents your future. It is only natural to want to check how your investments are doing. How often you need to do this depends on the type of investor you are. Speculators who constantly buy and sell individual stocks will monitor performance frequently, perhaps daily. Those investing for the long term with robust

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Why do I own bonds which do not pay me much?

In today’s markets, bond yields are low and those of high-quality bonds are the lowest. In addition, they could quite feasibly crash too with interest rate rises. So why have bonds in a portfolio? It is quite straightforward. Imagine you only hold equities with a portfolio of £200,000. The economy takes a turn for the

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Why is diversification so important?

Building an investment portfolio requires a mixture of investment science and common sense. The evidence suggests timing when to be in and out of markets (or sectors, or companies) is extremely difficult. It also suggests identifying a manager who can persistently beat the market is very hard to do in advance. We, therefore, focus on

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What is your approach to investing?

We sometimes refer to the way we invest as mostly being a ‘systematic’ approach. It is our duty to do what is right for our clients. When investing, we build on a foundation of facts. This is because we believe we would be doing our clients a disservice if we did it any other way.

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What does my portfolio invest into?

What is an equity (or share)? An equity (or share) represents ownership of part of a company. This gives you a right to your share of any dividends paid and a claim on the company’s assets. Returns from equities come from changes in the price of the shares and dividends paid out. Are all equities

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What is investing?

This may seem an obvious question with an obvious answer. In some ways it is. We believe investing to be the means of building wealth to fund lifestyle and personal choices. It is a slow, emotional, and sometimes painful process requiring a robust plan, patiently executed over many years. Anyone hoping to get rich quick

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What are dog funds?

The number of underperforming, or “dog”, funds has risen by a third this year, new data has shown. This is partly due to the gulf between the performance of different styles of investing. The pandemic has exacerbated this, but value and income investing have lagged behind growth investing for a while. How bad could having

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Do I have too much in cash savings?

The coronavirus (COVID-19) pandemic has caused massive job losses across the country. But some households have been saving more money than ever [1]. For these households, they have a choice which could have a big impact on their future wealth. This is the choice between saving or investing. More money to invest than usual The

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Why do you believe dividend investing is flawed?

We have written a post previously about focusing on income when investing. I wanted to go into some of the evidence behind focusing on income when investing not being the best strategy. When looking at this, there is probably no more famous theory in Finance than Modigliani/Miller. Known as the Dividend Irrelevance Hypothesis it says investors

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Can I buy commercial property with my pension?

All registered pension schemes can (in theory at least) invest in property, including land, either in the UK or overseas. Pension schemes can invest directly in commercial property, but many choose to invest indirectly using pooled vehicles. These include unit trusts, open-ended investment companies (OEICs) or real estate investment trusts (REITs). As well as allowing

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Is my money locked away if I invest?

It is always important to manage expectations when investing. We often get questions about whether there is an explicit time someone must invest for how accessible the money is. How long do I have to invest for? If you are investing in an investment account or an ISA, then technically you could invest the money

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How could the US Election affect my portfolio?

Many investors are worried about the US election’s effect on the stock market. One school of thought is a Biden victory could lead to measures that would hit businesses. Another asserts the stock market prefers Republican victories. What does the data say? The logic of efficient markets is that anticipated events do not impact prices.

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What has NS&I done to its savings rates?

National Savings & Investments has significantly cut the rates it offers to savers. Savings analysts have long kept one eye on NS&I’s next move. The bank helps to fund the Government’s spending, so it has to balance the rates paid to savers with the cost to the Treasury. NS&I had planned cuts earlier this year.

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Should I invest my money or pay off my debts?

You may have some spare money some surplus income. Either way, you might be thinking about what is best to do with this. Is it better to invest or repay your debts early? Paying off your debt could mean means reduced stress, and a greater ability to withstand personal emergencies, recessions, and depressions. Investing means

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Should I still be investing in Commercial Property?

The Financial Conduct Authority (FCA) is floating the idea of new rules designed to improve investor experiences in open-ended UK Commercial Property Funds. Most are currently suspended due to uncertainties on the value of the properties because of the COVID pandemic. In the past, they have placed restrictions on withdrawals due to a lack of

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How can invest for a child?

Investing for the financial future of children and grandchildren are key areas of concern for parents and grandparents. This can be for various reasons including funding education or helping them to buy a house in the future. There are special rules to consider when investments are made for the benefit of, or on behalf of,

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Could we soon see negative interest rates?

Something happened yesterday which has never happened before. The Debt Management Office (DMO), the Treasury arm charged with the task of selling government debt, sold £3.8bn worth of gilts at a negative yield. The stock concerned was 0¾% Treasury 2023 and the average yield was -0.003%. There was no shortage of market interest as they could have

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Is gold something I should be investing in?

There is a debate about whether gold makes for a good way to protect portfolios against stock market declines or rising inflation. When I was at school the currency of the playground was premier league stickers. If you had a “shiny” you could command a higher price than the standard card. Deep down, there is

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How does rebalancing my portfolio help?

Watching your portfolio’s returns go up and down can be an emotionally trying experience. Rebalancing to a predetermined, diversified asset mix makes it so you do not have to worry about market instability as much. Having a suitable mix of assets in your portfolio can serve as a buffer against extreme swings in the market.

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What is a Lifetime ISA?

Lifetime ISAs aim to help people aged between 18 and 40 save for their first home or retirement. A Lifetime ISA (LISA) lets you save up to £4,000 per year. At the end of the tax year, the Government will top up your ISA with a 25% bonus. These bonuses are available on LISA contributions

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What is an ISA?

Anyone, who is a taxpayer and has money to save or invest, should look at Individual Savings Accounts (ISAs). These are “wrappers” in which someone can hold a range of savings and investment products. They are free of UK income and capital gains tax by anyone aged 18 or over (16 or over for cash

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What are Junior ISAs?

Junior ISAs (JISAs) became available from November 2011. Both cash and stocks and shares JISAs are available. Children can hold one of each at a time (two accounts in total). Who is eligible? All UK resident children under the age of 18 who do not have a Child Trust Fund (CTF) are eligible for JISAs.

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What returns can I get?

The returns you can get from your money can mean different things to different people. To some, getting better returns is something to boast about. We believe returns are meaningless unless they go towards making your life better in some way. This can be being able to retire earlier or being able to help loved

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Is investing risky?

Over time, those who have invested money into the world equity markets have generally done best. However, investing our hard-earned money, and the risks involved, can make any of us feel nervous. Any decision you make involves risks. The decision to invest is no different. Whatever you invest will go down in value as well

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