“Coronavirus puts the squeeze on retirement hopes”
Workers in their 50s may have to rethink their long-term plans.
COMMENT: This article focuses on how the current downturn in the investment markets could affect someone who is about to retire. Whilst we can never predict when they are going to happen, downturns like this are to be expected. They are a feature of the process, not a bug. We always explain this to our client and our planning takes it into account is a flawed one. For those who are coming up to retirement, it is a good time to revisit their plans.
“Value and growth investments gap at 25-year high”
Some analysts say value stocks are now so inexpensive that it could be an opportunity to buy.
COMMENT: The evidence on what works best when investing for the long term suggests it is not a good idea to time the markets like this. Instead, we spread money across the investment landscape. This includes both “value” and “growth” stocks. Owning both means not being overexposed if things go the other way.
“Annuities that pay less than savings accounts”
Many of these products still have commission attached which, with rates this low, makes no sense for savers.
COMMENT: An annuity, a guaranteed income paid from a company in exchange for all or part of your pensions, are out of fashion. This is due to a combination of poor rates, their inflexibility and the inability to leave a lump sum to loved ones. This does not mean they should be dismissed out of hand. Where someone needs an income, especially to cover essential expenses, we always consider this option.
“How young investors fell out with fund managers”
Young people saving for retirement are favouring lower-cost tracker funds that simply follow an index and often beat professional stock-pickers.
COMMENT: The evidence on how best to invest for the long term suggests low-cost tracker funds will outperform the average “active” fund. For someone managing their own money, it may be that using such funds is a better way to easier and better way to invest for them. There are many reasons for this. Our portfolios take the fact that finding active funds who could outperform is difficult. We only use them when we have a high degree of confidence in their ability to do so.
“Beware early withdrawals from pension”
The over-55s who dip into their pension pot could find that their spending comes with a sting, pensions experts have warned.
COMMENT: This story relates to the rule that if someone takes any taxable withdrawals from their pension, the amount they can pay into such pensions reduces to £4,000 pa. To explain this further, everyone with a money purchase pension can withdraw 2% of the fund free of tax as a lump sum or in stages. After this has been taken, HMRC tax any further withdrawals as income. Anyone who takes these potentially taxable withdrawals will find that is they were paying more than £4,000 pa into pensions, both personally and via their employer, they will need to reduce contributions from all sources to £4,000 pa. Pensions are a highly tax-efficient way to invest so whether to constrain this is a decision which should not be taken lightly.
“Savers ditch wealth managers after advisers stay silent on stock market falls”
Some investors have seen their portfolio fall by 30% yet heard nothing from their financial adviser, as Covid-19 piles on the pressure.
COMMENT: In times of market difficulties, the best thing to do is nothing. It seems some advisers have taken this a little too literally. Communication is key. Feeling nervous and the need to do something is completely natural. We are here to reassure clients that their plans, and their portfolios, took the prospect of multiple market downturns over their time horizon into account. We have posted about it in this blog and been in touch with our clients directly. Anyone who has not heard from their adviser may want to consider whether they are right for them.
THE GUARDIAN / OBSERVER
“Ethical investments are outperforming traditional funds”
Evidence suggests that environmentally focused investing is becoming mainstream.
COMMENT: We have seen that the ethical versions of our portfolios have performed well in the last six months. This is understandable as this downturn has particularly impacted polluters such as oil companies and airlines. This does not mean ethical portfolios will outperform in every conceivable scenario and in some they could do much worse. Ultimately the decision to invest in an ethical portfolio is one about values, not the last six months of trading.