Archive | July, 2012

Don’t Get Caught Out By The Taxation Of Investment Bonds

21 Jul

Earlier this week I met a new client, who is in an awful tax scenario because of how he drew money from two investment bonds – realistically tax should not have been an issue. The problem was caused by their previous financial adviser not understanding the tax rules and making a dire mistake.

I thought I would write an article on this as it is so common for people to suffer a tax bill when no tax could have been payable – the failing being how the bond is taxed and not drawing the proceeds in the most tax efficient manner.

Remember with an investment bond, the policy is made up of mini-policies so you potentially have more flexibility of how you encash.

There are two sets of rules for tax depending on how you withdraw money –  

1. Top Slicing – this is where you draw a proportion of the whole bond equally across all of the mini-policies. The advantage of this is if you draw up to 5% of the original investment, then this is treated as a repayment of capital until such time as you have withdrawn all of your original capital and thereafter assessed to income tax at your marginal rate of tax.

What this means is if you stay within the 5% Rule – you could defer any payment of income tax until another day many years away.

The problem comes if you draw more than this 5%, then the addition is added onto your income to assess the tax liability.  So typically, not the best way to withdraw large amounts of capital from then investment bond.


2. Encash whole mini-policies – tax is assessed and payable based on the profit made on each mini-policy.


Scenario 1

Client invests £50,000 in an onshore bond and £50,000 in an offshore bond, both invested just under 5 years ago and he has seen a slight drop in value through the investment to £49,000 for each bond.

Client now draws £90,000 – £45,000 from each bond by an equal apportionment across the policies (Top Slicing)

Problem being anything over the 5% Rule, when encashed in this way will be assessed and taxed as income.

Okay, lets say he has an average income of £25,000 per annum

5% Rule for each complete year – 20% of the original – £10,000 on each bond

Onshore and Offshore bonds – to be assessed against income leading to a further expected tax liability of £19,126


Scenario 2

Exactly the same as scenario 1 except – now draws £90,000 – £45,000 from each bond by an cashing individual mini-policies

The good news – each investment bond has seen a slight decline in value. Tax is only payable on profits.

Onshore and Offshore bonds – to be assessed against income leading to a further expected tax liability of £Nil 



The point being – if you are withdrawing a fixed regular amount of say up to 5% per annum of the original investment – then Top Slicing can be an effective tool.

If, however you are withdrawing a capital amount there are typically better approaches.

Please be aware that this only touches on the taxation of investment bonds – this is actually a very complicated area but the basics are clear and sound.


Investment Tax Wrapper – Investment Bonds v Collective Investments

20 Jul

I always find the argument around the suitability of the investment wrapper paramount. Too often I see new clients – who maybe non-tax payers with an investment bond wrapper rather than collective. If this is personally owned I struggle with why someone has chosen to pay Basic Rate Tax when they most likely could have paid no personal tax – admittedly the tax is paid within the fund but all costs will affect investment performance.

OK lets start by getting a bit of jargon out of the way…when I use the global term Collectives, I am referring to anything along the lines of OEICs, Unit Trusts, Investment Trusts, SIVACs, UCITS I, II, III, etc. I am just trying to use an all-inclusive term.

Choosing the most appropriate investment for an individual will depend upon many factors including :-

  • personal circumstances
  • investment objectives
  • current and future levels of income

What factors to consider?

The summary below compares bonds and collectives from the perspective of taking an income, capital growth and various tax and estate planning options.  Whilst the choice of investment should not be made for taxation reasons alone it will be a critical factor.  Other key factors will include product pricing, charges, investment structure, administration and service, fund choice, asset classes, death benefits and trust options.

Investment Bonds


Taking an income Taking an income
5% withdrawals can be taken per annum without incurring an immediate tax charge (deferred but not free of tax) and any unused allowance can be carried forward to future years. • Bonds are a useful way of providing an ‘income’ without any impact on an investor’s personal allowance and/or age allowance, (within the 5% allowance).• If withdrawals exceed the 5% allowance (or higher cumulated amount), tax may be payable depending on the tax position of the investor and whether the bond is either onshore or offshore • Because investment bonds are non-income producing assets there is no need for annual tax returns, unless there has been a chargeable event (such as exceeding the 5% annual allowance) resulting in a chargeable gain (realised profit).                             • The income from a collective will be taxable whether taken or reinvested. Non-Equity funds (which hold greater than 60% in cash or fixed interest) have income paid as an interest distribution net of 20% tax (and non-taxpayers can reclaim). Equity funds (which hold less than 60% in cash or fixed interest) have income paid as dividend income with a 10% non-reclaimable tax credit. • Income paid (or reinvested) from a collective will be included in the assessment of an investor’s personal taxation and/or age allowance – although if the collective is held under an ISA wrapper this problem is solved.• Disposal of shares/units to supplement income is a disposal for capital gains tax, although this may be covered by your annual capital Gains Tax Allowance (currently £10,600 in Tax Year 2012/2013). The rate of CGT payable will depend on the allowances and reliefs available to the investor and on their income tax position.• Because collectives produce income they will normally need to be reported each year to HMRC, even if accumulation units or shares are chosen. Capital gains may also need to be reported when a disposal takes place but only if tax is expected to be payable.
Capital growth Capital growth
• When the bond is surrendered (this is a chargeable event) tax is assessed and may be payable depending on the personal income tax position of the bond owner. This is true whether the bond is either onshore or offshore.• Switching funds in an investment bond can take place with no tax implications for the investor. (This is not a disposal for tax purposes while the funds remain under the bond wrapper.)                                              • When shares/units are cashed in, this is a disposal for capital gains tax although this may be covered by your personal Capital Gains Tax (CGT) Allowance. • Losses on disposals can be offset against other capital gains – so can create effective tax planning scenarios.• Taper Relief and Indexation Allowance are no longer available on personal scenarios.• Switching funds within a collective is a disposal for CGT with possible tax and reporting requirements.
Tax & Estate Planning Tax & Estate Planning
• Individuals may be able to alter their level of income to reduce or avoid tax on surrender of the bond.Examples – those who have pension income in drawdown can reduce their income received to minimise tax payable; or could use part of the proceeds to help fund a pension, EIS, VCT, etc. so that the tax credit created offsets the tax bill associated with the investment bond encashment. • Gifting the bond (by assigning it nit not for “monies worth”) to a lower or non tax-payer. So an assignment to a spouse or child in further education may not create any liability (depending their personal tax rate) to CGT or income tax. It could reduce or avoid the tax that would otherwise have to be payable by the investor. • Individuals may be able to make a pension contribution to reduce or avoid any further liability to income tax on the surrender of their investment bond.• Gifting the bond to another (i.e. assigning into trust or to an individual) will be a transfer of value for Inheritance Tax and depending the terms of the trust may be covered by an exemption – more commonly though will be treated as a chargeable lifetime transfer.

• Having multiple lives assured can avoid any chargeable event upon death of the bond owner. This is assuming the contract is for encashment on the death of the last life assured. 

• If a chargeable gain arises in a tax year in which the investor is non-UK resident then there will be no further liability to UK income tax.  There may be a tax liability in their country of residence.

• A special relief applies to offshore bonds that reduces the tax liability on chargeable gains for individuals who have been non-UK resident for any period of their investment – Time Apportionment Relief.

• Investment Bonds, depending on the interpretation by local authority, may not be included within the means test for local authority residential care funding – care is needed as this varies from authority to authority, year-to-year, the circumstances surrounding and prior to the investment and many other factors.

• Individuals may be able to alter their level of income to reduce the tax rate payable on a capital gain e.g. those who have pension income in drawdown may be able to reduce it, by careful selection of funds within the collective to select the desires level of taxable income.• Transferring the collective to another individual or into trust will be a disposal for CGT purposes although this may be covered by your Personal Annual Allowance to CGT, or an exempt transfer between spouses. If into trust, gift holdover relief may also be available depending on the type of trust.• Individuals may be able to make a pension contribution which in turn could reduce the rate at which they pay CGT.• Transferring the collective to another individual or into trust will be a transfer of value for Inheritance Tax purposes, although this may be covered by an exemption.• No CGT is payable on death.

• Investors who are both non UK resident and ordinarily resident will not be liable to UK CGT on disposal of their collective.  However, anti-avoidance legislation means they will need to remain non UK resident and ordinarily resident for five complete tax years for the gain to remain exempt from CGT.

•  Collectives are included within individual’s assessment for local authority residential care funding.

Taxation of Fund  Taxation of Fund
Onshore Bond funds’ internal taxation is extremely complex. In general terms it can be summarised as follows:• Interest and rental income are subject to corporation tax at 20%. Dividends are received with a 10% tax credit which satisfies the fund manager’s liability.• Corporation tax is payable on capital gains at 20%. Indexation allowance is available to reduce the gain.• Investors are given a non-reclaimable 20% tax credit to reflect the fund’s taxation.Offshore Bond funds are typically located in jurisdictions which impose no tax upon investment funds, such as Dublin, the Channel Islands and the Isle of Man. And so:

• Interest, dividends and rental income are tax-free while under the bond wrapper. Some non-reclaimable withholding tax may apply to certain overseas income.

• No corporation tax is payable on capital gains.

• Personal tax position, rates and residence status must be considered carefully as taxation is typically payable at your highest marginal rate when the bond is finally encashed.

Collectives are only subject to tax within the fund on income received, and so:• Interest and rental income are subject to corporation tax at 20%. Dividends are received with a 10% tax credit which satisfies the fund manager’s liability.• No corporation tax is payable on capital gains within the fund.



There is no black and white answer on this – it is all circumstance specific but an understanding of the differences is essential. My belief is only pay tax when required and lawful – so products with an inbuilt taxation are to be used only when necessary, the lesser tax rate or for a specific reason/purpose.

Investors make money through investments with three key principles – fair costs, minimise taxation and investment performance.

Some Argue We May Be Heading For a Financial Melt-Down

18 Jul
It is concerning that the Bank of England had made contingency plans for its staff to be given bicycles so they could still get around in the event of a full-scale financial meltdown. So are we heading to a financial melt down and market crash?

stock market collapse 

This could be good news for investors – this would create a buying opportunity for the prudent investor. It is fair that few economic forecasters expect the economy to go into full-scale meltdown, it appears that if it does, it won’t be long before a new economy establishes itself.
A full-scale collapse of the Euro, China grinding to a crunching halt and the US plunging over the fiscal cliff are real possibilities. There are signs from the bond markets, that the financial world is under the fear of negative pressure.

Government and Treasury Bonds, in some cases, are paying negative yields – investors in effect are now willing to pay for the privilege of lending money to the likes of Germany, Switzerland, Denmark, Holland, Finland and France, just to get their capital into a perceived safe haven. 

I believe, in the case of the Eurozone, the money flowing into the stronger countries is primarily being driven by fear. How I see this – for investors, say living in the Eurozone countries such as Greece – buying the risk of a small loss on German debt is preferred to the risk of the potentially substantial loss of purchasing power, should the country leave the single currency and bring back the drachma.

The collapse of the Euro would be disastrous for financial markets. 

There are also worries that the crisis in the Eurozone is distracting everyone from the real problem in the US. American Debt is expected to reach the $16.4trn cap before the end of 2012; plus the expiration of current tax cuts and $1.2trn spending reductions could push the US into recession. (The worse case scenario would be a full US default possibly caused by the debt cap.).

economic tsunami


The outcome of this is unthinkable – most asset classes would fall significantly in value. Liquidity in capital markets would disappear, corporate bonds and property markets would re-price accordingly and equity markets would suffer a serious decline.

The exception would be expected to be some physical assets but otherwise – value would be irretrievably destroyed, even in asset classes that have traditionally been defined as offering lowest risk.

Gold maybe argued could be one of the exceptions.
The troubles of the Eurozone and potential risks of instability are also anticipated to support gold as a possible hedge or insurance against asset devaluation and potential inflation.
It is good to review the risk and potential outcome of a total melt down but how large a risk exists? I believe that there is a real and present danger but are not at the point of collapse – we almost saw this scenario at the heights of the global recession lead by banking collapse, massive bail-out programs, etc. etc.
Fear is a realistic part of our psyche and is healthy. Maybe some of the past problems have been created or at least exacerbated through the ignoring any potential down-side.
Always, I believe, we should only make decisions, including the potential to bad as well as to good – being realistic is key to success and changing our position and asset allocation to reflect what is realistic and potential. Investing is all about what will happen, while taking into consideration what has happened.

The Markets, Fear and Investments On Tuesday

17 Jul

It seems that the optimists in the markets are rallying and so seem to have taken the technical helm at the moment.

The good news – corporate reports are looking attractive compared to forecasts with more than a few market heavyweights topping views.

The bad news – today’s results are finding it harder to impress or influence the broader market with any strong conviction.

On the economic front, a trio of economic reports came in mostly better-than-expected and has provided some anecdotal support for optimistic market trading, though this failed to draw any real reaction from market participants.

Chart forVOLATILITY S&P 500 (^VIX)

From Germany and The Eurozone ZEW Economic Sentiment surveys came up short of views. Australia’s Reserve Bank’s minutes noted “China may not be slowing much further, although the outlook remained uncertain”. If that sounds unsatisfying, you’re with me on that – my opinion.

And finally, the VIX (commonly called the fear index) is down 4.75% near 16.25%. The sentiment gauge is marginally below its one month lows and roughly 6% below its 10 Day Simple Moving Average.

Overall, the price action creates an environment (at least in the short-term), which looks conducive to market optimism. Investors should remain wary of any potential complacency.

What’s Happening To The Global Growth Story?

17 Jul

The International Monetary Fund states the global economic recovery is still at risk, and Eurozone economies remain in a “precarious” situation.

Indian economic recovery1 Finance Friday : India To Lead Global Recovery

With the backdrop of the financial crisis, issues around the world including China, US and especially the Eurozone – the figures are relatively good, as at least they’re positive. Yes, compared with forecasts in April 2012 the figures are worse but is that due to a decline or the previous figures being overly optimistic. Personally, I believe the latter to be the case but that doesn’t mean all is well – rather the results are within the expected range – not bad news, not great but rather feared and anticipated.

A major concern as current is  a delayed or insufficient response from European leaders to the crisis would further derail the recovery. This looks unlikely when one reviews the decisions and actions so far – but nothing is impossible.

The IMF has downgraded its forecast for global growth for 2013 to 3.9% (from the 4.1%).

One of the biggest downward revisions was to the UK, now expected to grow by 1.4% in 2013. In April it predicted 2%. The forecast for growth in 2012 was also reduced for the UK, down to 0.2% from the 0.8% cited in April. These are now more in-line with my personal expectations – in my speak I would say these figures now look realistic rather than the previous forecasts were significantly more optimistic.

The IMF’s prediction for world output this year – as measured by gross domestic product – was little changed at 3.5%.

In its updated World Economic Outlook, which is published twice each year, the Washington-based lender said: “Downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action.”

The Eurozone

The fear over Europe and the Eurozone is the sovereign debt crisis and the need for its’ leaders to :-

  • take further action to avoid an escalation in the debt problem 
  • prevent a market meltdown
  • there must be the utmost priority to resolve the crisis in the euro area


The 17-member Eurozone economy is expected to contract by 0.3% this year before rebounding by 0.7% next year.

The IMF, the European Central Bank (ECB) and the European Union, has demanded austerity measures in the struggling economies of Greece, Spain and Portugal in return for bailouts.

The crisis has led millions of people to lose their jobs and benefits. There were also concerns that runs on bank deposits would trigger a Eurozone-wide bank run and banking crisis.

Recently, Eurozone leaders agreed to bail out Spanish banks directly and unveiled a plan to implement a fiscal and banking unification. But the proposals for such a decision will not become concrete until later this year, and it is not yet known how long it will take for such a union to take shape.

The ECB last week cut its benchmark lending rate below 1% to 0.75%. In addition, the IMF has called on the ECB to use less orthodox monetary tools – possibly providing the region’s banks with additional unlimited loans, or long-term refinancing operations (LTROs) – but there are risks associated with such actions.


United States

The IMF also urged US lawmakers to solve their “fiscal cliff”. This refers to a set of fiscal deadlines at the end of the year, including deciding whether to extend tax cuts for the wealthiest Americans.

If policymakers fail to reach consensus on extending some temporary tax cuts and reversing deep automatic spending cuts, the US structural fiscal deficit could decline significantly – IMF suggests possibly 4% of GDP in 2013. Whatever the actual figure, the risk is if this is resolved, US growth could stall next year, with significant spillover into the rest of the world.


Emerging Markets

Growth in emerging economies was also revised downwards. The IMF has forecast growth slow down to 5.6% in 2012 before picking up to 5.9% in 2013.

Growth momentum dropped particularly in Brazil, China and India, considered to be the drivers of a global recovery.

That was aggravated by risk aversion among investors who pulled out their money out of these economies, causing domestic share prices to drop.


My Outlook

I believe we are on track for weak growth but at least there is growth. With the back-drop of the economic and fiscal world we now find – I don’t believe we could expect for more.

As for the markets – the concern being are we trading in a range? Or will there be actual headline growth?

I am defensive in my general outlook and feel that to manage portfolios with the plan of positive returns. My chosen overall strategy is to focus on diversity, strong dividend and income growth, global and niche exposure, take advantage of opportunities as and when they exist and be realistic.

Market Update On 13 July 2012

13 Jul
So lets summarise the last couple of weeks  – alot and yet nothing has happened. There has not been a new crisis, failure or collapse. There  are dire issues but with proactive action, fiscal pain and possibly the effects of inflation and a change in perspective of normality – I think the endeavours will eventually be successful admittedly with many hicups, breaking news of the latest banking fiasco, mistakes and corrections – and with the odd (maybe more than odd) panic.

Barcelona events april 2012

Some of the major recent events which have caught my eye :-
1.  Bank of England – High Street Bank Lending Scheme Details Due
Sir Mervyn King said there was “a great black cloud of uncertainty” hanging over global business. He has announced in his Mansion House speech, the launch of a scheme aimed at boosting High Street bank lending – to be unveiled later by the Bank of England.

The aim is to make billions of pounds of cheap funds available to banks but only if they use the money to boost loans to businesses and consumers. The move is part of a raft of measures taken to try to increase lending. This is the first initiative which makes loans to banks conditional on the money being passed on through mortgages or business loans.

The belief is the bank of England could initiate circa £80bn to be available if High Street banks increase lending by 5%.

Crucial to its success will be whether it really does persuade banks to make affordable credit widely available.

2.  Republic of Ireland growth in 2011 Double Original Estimate

Irish Prime Minister Enda Kenny has been cutting spending to meet bailout conditions. The Republic of Ireland’s growth rate last year was double previous estimates at 1.4% but this year started badly, official figures show.

It means Ireland escaped technical recession last year – two consecutive quarters of negative growth, although the economy shrank by 1.1% in the first three months of this year.

The figures were produced by the Central Statistics Office (CSO).

3.  Euro falls to it lowest against the US Dollar since 2010

The euro has fallen to its lowest level against the dollar for two years on worries over Eurozone prospects and as minutes from the US Fed dampened hopes of any new stimulus measures.

The euro fell to $1.2165, its lowest level since mid-2010.

US Fed minutes released on Wednesday from its June meeting suggested it was not planning any imminent additional moves to boost the US economy. In contrast, the European Central Bank cut interest rates last week from 1.00% to 0.75% (a record low for the Eurozone). It also cut its deposit rate, from 0.25% to zero.

The value of the euro has also been hit by worries over growth prospects for the Eurozone and whether it can tackle the current debt crisis.

4.  China’s GDP Glows at its Slowest in Three Years – 2nd Quarter 2012

China’s GDP grew at its slowest pace in three years in the second quarter, but other less-cited indicators are already signaling that the world’s second-largest economy may be starting to turn around.

The economy grew 7.6% in Quarter 2. This is slower than the 8.1% in Quarter 1 and 8.9% in Quarter 4 2011. There are fears of a hard landing but the Chinese economy is still relatively strong.

JPMorgan’s Chief Asian equity strategist Adrian Mowat has stated that he expects China’s GDP to come in at 7.7% for the year overall and 6.6% quarter over quarter. That would make Quarter 2 the weakest quarter since the final quarter of 2008.

5.  Moody’s Downgrades Italy by Two Notches

Moody’s Investors Service downgraded Italy’s government bond rating by two notches to Baa2 from A3, and warned it could cut it much further if the country were to lose access to debt markets.

The move left Italy’s rating just two notches above junk status and could raise its borrowing costs ahead of a bond sale due later on Friday.

6.  LIBOR And The Banks – Fines Estimated At $22 Billion

Twelve global banks that have been publicly linked to the Libor rate-rigging scandal face as much as $22 Billion in combined regulatory penalties and damages to investors and counterparties.

The analysis, which the authors admit is “crude”, assumes that 11 more banks will be penalised like Barclays, which paid $456 Million in June to US and UK authorities for attempting to manipulate the London Interbank Offered Rate, the benchmark for $360 Trillion in derivatives, loans and mortgages.

The calculation excludes the potential fallout from ongoing US and European Union cartel investigations, which could result in multibillion-dollar fines.

7.  Markets Await JPMorgan Report on Its Derivatives Trading Losses

Later today, J P Morgan will reveal details of its controversial derivatives trading loss along with second-quarter earnings.

Analysts expect JPMorgan to take anywhere from a $4 to $6.5 billion trading loss, resulting from a trade put on by the  major traders in its London office.

8.  US Cracks Down on Iran’s Use of Front Companies

The U.S. tightened the screws on Iran Thursday, imposing additional sanctions targeted at Iran’s use of front companies to subvert Western sanctions on oil exports.
The U.S. identified dozens of Iranian front companies, ships and banks that it said were helping Iran avoid sanctions aimed at stopping it from acquiring nuclear weapons. The Treasury identified Noor Energy, Petro Suisse, Petro Energy and Hong Kong Intertrade as companies used by the National Iranian Oil Company. U.S. official are also working with the maritime industry to identify Iranian ships, by number, even if they are reflagged or repainted.
9.  Market Savior? Stocks Might Be 50% Lower Without Fed
A report from the Federal Reserve Bank of New York suggests that the bulk of equity returns for more than a decade are due to actions by the US central bank.

Theoretically, the S&P 500 would be more than 50 percent lower, if the bullish price action preceding Fed announcements was excluded, the study showed.

This was posted on the New York Fed’s website on Wednesday. The study sought to explain why equities receive such a high premium over less risky assets such as bonds. What was found was the Federal Reserve has had an outsized impact on equities relative to other asset classes.

10.  Fear of Year-End Fiscal Stalemate

With the economy having slowed in recent weeks, business leaders and policy makers are growing concerned that the tax increases and government spending cuts set to take effect at year’s end have already begun to cause companies to hold back on hiring and investments.

Economists say the magnitude of the effect remains unclear and the fiscal uncertainty is probably not the economy’s main problem, but is instead one of several factors — along with Europe’s troubles, the spike in oil prices and a continuing hangover from the housing bubble — restraining growth.

11.  Markets Expected To Rebound in Second Half

When we exit the current soft patch in the second half of the year, markets are expected to benefit.

I think in the next couple of months, what we will see is the battle between earnings and how bad is this news? or we will start to see signs the soft patch is ending and we’re bouncing. If that happens I don’t think we’ll worry about earnings in the last quarter. We’ll care about where the market is going.

But if the economic data remains soft, the earnings seasons news will take on more significance.

Global policymakers should also succeed in bolstering the worldwide economy. This is the first time in this recovery that you have almost every policy official around the globe easing.

This recovery is like the last longer – it’s rolling out much slower, but each time in the last two recoveries it took three years before we decided that we are in recovery. Years 4 of the economic cycle things started to gear, confidence finally went up, the job market finally came to life. I think this is likely to follow a similar trend.

How To Invest In A Crisis?

12 Jul

There is no simple answer as to what to do –


Scenario 1 – there are those who say if I don’t look at my investments it will go away and everything will be fine – maybe but which decade is the question.

Scenario 2 – do nothing and the markets will return – maybe but not sure if that will be in my lifetime

Scenario 3 – convert all investments into cash (cash is king?) – but then inflation runs at a higher rate than the net rates of interest typically available but at least the capital value doesn’t drop just its buying power

Scenario 4 – structured products but what about Lehman Brothers – who could be next? Anyway how say are these investments?


How I Approach This For Clients

Investments are split theoretically into three defined areas – deposit based, structured products and investment portfolio.

Some of the questions to ask (this is an infinite list so her are just a few) :-

1.  When do you need access to the money? (This will have differing lengths depending the facility, your needs, goals and wishes)

2.  How long is the investment period for each of these investments?

3. Taxation – what tax structure would help minimise tax payable (i.e. if you pay less in tax then you can, assuming you make a profit, retain more of the profits)

4.  Attitude to Investment Risk – risk of inflation eroding the buying power of the capital value, risk of corporate actions and failures, volatility of the capital value

5.  Goals and Expectations – keep them realistic

6.  Your age and earning potential

7.  Changes to personal circumstances – coming up to retirement, changing jobs, losing your job, career development, periods of retraining, etc.

8.  Capital protection, income and/or growth

9.  Make a plan, follow the strategy through – review and be ready to change depending on outcomes – only factual not emotive



The point is there are many-many issues to consider and this will alter the structure and the inclusion of assets in your investment portfolio. The important point is to minimise costs and tax wherever possible and maximise potential risk adjusted returns.

So don’t leave cash money in a fixed term or bonus related deposit facility post maturity date as the proceeds will be, in most cases, placed on a low-interest bearing account awaiting your further instruction. If you have a variable rate facility – check the rate you are receiving (rates change).

Structured products – not suitable for all but may be a good investment portfolio diversifier but care is needed as the range, success and risks linked to these products are diverse. The potential is to include an asset that behaves in a different way to both cash and portfolio – with a clear idea to potential returns (assuming product criteria are met).

Portfolio – in my opinion this has the greatest potential to positive returns but over a medium to longer term. In the short-term especially, volatility is a major issue and the capital value will fluctuate both up and down. This is the reason why risk profile is so important. By combining assets and asset classes in the portfolio this will design a level of volatility to match your outlook. This is designed to narrow the range of possible outcomes to match your tolerance to volatility and losses but in the fullness of time to hopefully achieve the planned returns.

The point with investing is – review on a regular basis and changes may be needed over time but will depend on many variables.

The focus is make a profit but be realistic – never get caught up in the euphoria of success – i.e. if something is doing exceptionally well why? and it may be the fore-runner of a boom (and or bust) market – a glitch or something else. In the same vent – if something is underperforming and looks unlikely to perform – should this be retained? Investing is not about always being right but rather putting right what went wrong and quickly.

Alas, I am yet to meet anyone whose crystal ball which works any better than mine and my crystal ball has never worked anyway.

With investing – remember never panic, don’t buy on a whim or when everyone says – you can’t make a loss – be logical and sensible.

I rely on expertise, constantly reviewing and assessing, making recommendations and implementing changes when suitable and listening to many market experts opinions, many-many market indicators, trend analysis, market research and most important COMMON SENSE.

Good luck investing – let me know if I can help.

Welshmoneywiz (Darren)