Money To The Masses http://moneytothemasses.com Putting you in control Mon, 30 Mar 2015 11:38:52 +0000 en-GB hourly 1 Best of the Sunday papers’ PROPERTY sectionshttp://moneytothemasses.com/news/best-of-the-sunday-papers-property-sections http://moneytothemasses.com/news/best-of-the-sunday-papers-property-sections#comments Sun, 29 Mar 2015 07:00:36 +0000 http://moneytothemasses.com/?p=16656 29th March 2015 The Independent The latest celebrity homes gossip The most luxurious homes on London’s rental market Be king of the castle: step inside wow-factor historic homes The Telegraph Revealed: Kevin McCloud’s favourite house How much have you made on your home since the last general election? Welcome to Miami and some of the...

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29th March 2015

The Independent

The latest celebrity homes gossip

The most luxurious homes on London’s rental market

Be king of the castle: step inside wow-factor historic homes

The Telegraph

Revealed: Kevin McCloud’s favourite house

How much have you made on your home since the last general election?

Welcome to Miami and some of the world’s most luxurious beach pads

 

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Best of the Sunday papers’ MONEY sectionshttp://moneytothemasses.com/news/best-sunday-papers-money-sections http://moneytothemasses.com/news/best-sunday-papers-money-sections#comments Sun, 29 Mar 2015 06:00:48 +0000 http://moneytothemasses.com/?p=16650 29th March 2015 The Independent Women to lose benefits from contracted out pension schemes Five questions on: Switching current accounts Parents will be able to switch dormant child trust funds to more competitive Junior Isa The Telegraph Young driver? Speed or swerve and your insurer will text your mum Return of the timeshare? The bargain...

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29th March 2015

The Independent

Women to lose benefits from contracted out pension schemes

Five questions on: Switching current accounts

Parents will be able to switch dormant child trust funds to more competitive Junior Isa

The Telegraph

Young driver? Speed or swerve and your insurer will text your mum

Return of the timeshare? The bargain ‘holiday’ where you can’t leave the hotel

Savers face worst rates since the creation of Isas

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Tax year end checklist – Time’s running outhttp://moneytothemasses.com/tax-advice/tax-year-end-checklist-end-of-tax-year http://moneytothemasses.com/tax-advice/tax-year-end-checklist-end-of-tax-year#comments Sat, 28 Mar 2015 13:02:52 +0000 http://moneytothemasses.com/?p=14570 With the end of the tax year (5th April) just around the corner time is running out to complete those tax year sensitive tasks before the 5th April. So below I’ve compiled a tax year end checklist. Tax year end checklist Pensions Pay into your pension – pensions offer a tax efficient way to invest for your retirement....

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tax year end checklist 2014With the end of the tax year (5th April) just around the corner time is running out to complete those tax year sensitive tasks before the 5th April. So below I’ve compiled a tax year end checklist.

Tax year end checklist

Pensions

  • Pay into your pension – pensions offer a tax efficient way to invest for your retirement. A pension fund grows tax-free and any contributions you make into the plan also receive income tax relief at your highest marginal rate. But you can not access your pension fund until you are 55. You receive tax relief on any contributions up to 100% of your earnings (capped at the current Annual Allowance of £40,000) or £3,600, whichever is greater. Making pension contributions can lower your income tax bill, restore lost personal allowances or help you avoid the new child benefit tax charge.
  • Carry forward pension contributions –  unused pension contribution Annual Allowances can be carried forward, and used, from the previous 3 years.
  • Pay into your spouse’s pension – even non-earners such as housewives can get tax relief on pension contributions. A non-earner can pay £2,880 each tax year into a pension and receive an additional £720 from HMRC.
  • Boost your state pension – by topping up any shortfall in your National Insurance contributions. Normally you have to do this within six years of the end of the tax year for which the contributions are being paid. Full details of time limits, rates and exemptions can be found here on the HMRC website.

Investments

  • Use your annual ISA allowance – You can shelter up to £15,000 this tax year in a Stock and Shares ISA (also called an investment ISA – here is a roundup of the best investment ISAs) or in a cash ISA, where all income, interest or a capital gains are tax-free! Here is a roundup of the best cash ISA rates available at the moment.
  • Pay money into your child’s Junior ISA  – up to the maximum of £4,000 in any tax year. Unused allowances are lost and can’t be carried over to the new tax year.
  • Consider tax incentivised investments - certain legitimate investments, such as Venture Capital Trusts (VCT’s), attract generous tax reliefs which are tax year sensitive. However, these investments are only suitable for sophisticated investors. But never make an investment just for tax reasons and always seek independent financial advice.

Tax

  • Consider disposing of any capital losses to offset against capital gains made elsewhere which may be liable to capital gains tax. You can also carry forward excess capital losses but you must declare them on your tax return within four years.

  • Use your spouse’s tax allowances – if your spouse has unused tax allowances then you may be able to use them by moving assets into their name. Read my article ‘How do I use my spouse’s unused tax allowances‘.

  • Be generous and reduce your Inheritance Tax (IHT) bill – there are a number of annual IHT allowances which are tax year sensitive. By using them you can reduce any potential IHT bill payable on your death. IHT is charged at 40% on estates over £325,000. Each tax year you can give away :

      • £3,000 and if you don’t make full use of your exemption in one year you can carry it forward to the next year, for one year only.
      • up to £250 a person (but not in conjunction with any other inheritance tax allowance).
      • £5,000 to a child who is getting married.
      • regular gifts from income which are IHT free. Size is irrelevant as long you can maintain your normal lifestyle after making them. But grandparents could use these to fund a pension for a grandchild which is obviously tax year sensitive.
      • For other ways that to reduce your tax bill see my 15 ways to cut your Inheritance tax bill.

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FTSE 100 – Where will it go next & how will the Election affect it?http://moneytothemasses.com/8020-articles/ftse-100-where-will-it-go-next http://moneytothemasses.com/8020-articles/ftse-100-where-will-it-go-next#comments Fri, 27 Mar 2015 15:07:53 +0000 http://moneytothemasses.com/?p=18711 So the FTSE 100 finally breached the almost mystical 7,000 point mark last week before returning below 7,000 this week. In fact, at its highest closing point it reached 7037.67 on 23rd March 2015. But what next for the FTSE 100? Will we see it go higher in the future or are there significant headwinds that could spark...

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So the FTSE 100 finally breached the almost mystical 7,000 point mark last week before returning below 7,000 this week. In fact, at its highest closing point it reached 7037.67 on 23rd March 2015. But what next for the FTSE 100? Will we see it go higher in the future or are there significant headwinds that could spark a longterm correction?

FTSE 7,000 – what triggered the rally

In my article from over a month ago, titled Stock markets at all-time highs, where next & should you buy?, I predicted that:

“if the FTSE 100 can break 6,930 the diagonal line of support could suggest that we’ll hit 7,000 pretty quickly”.

Well that’s exactly what happened albeit after a small sell-off. As I pointed out in last week’s weekly note, a combination of factors came together to help push the index over the 7,000 line. They were namely a Budget which was positive for investors plus there were encouraging noises from central banks globally that the loose monetary policy (via money printing or low rates) is not going to let up anytime soon. Chuck in a soft pound which is good for exporters and the stage was set.

But does the level of the FTSE 100 really matter if you aren’t invested in an index tracking fund? While you shouldn’t obsess over the level of the FTSE 100 the return of the average UK equity fund is closely correlated to the fortunes of the index despite many funds investing in companies that are outside of it. The return of the average UK equity fund run by a manager has a correlation of 0.95 to the FTSE 100.

To put that into context a correlation figure can range between 1 and -1. A figure of 1 would mean that the return of the average equity fund exactly mirrors that of the FTSE 100. A figure of -1 would indicate that when the FTSE 100 goes up the fund would go in the opposite direction. While a figure of 0 suggests that they are completely independent of one another.

So if you are investing in UK equites, even via a managed fund, then the fortunes of the FTSE 100 matter.

Tailwinds

There are some definite tailwinds in equity markets generally which are proving supportive of shares. Firstly there is the accommodative monetary policy mentioned above and then the relatively soft pound which is good for exporters.

Consumer consumption has been given a boost by low oil prices as inflation has fallen to 0% in the UK. In addition the ISA season is upon us and this tends to be supportive of equity markets. In addition investors are seeing headlines about all-time highs in the FTSE 100 which can act like a candle to a moth, blindly attracting them regardless of the potential dangers.

The psychology of investing can not be underestimated and breaching the 7,000 mark broke the range trading (i.e. where the index bounces around within in a limited range) which has dogged UK equities for some time (see chart below – click to enlarge it).

Screen Shot 2015-03-27 at 14.10.55

Nothing encourages investors from the sideline more than the fear that someone else is making money when they are not. In that regard the ‘great rotation’ which has been expected for a number of years (where investors ditch safe assets to buy equities en masse) could start to materialise. In addition, a number of momentum indicators used by day traders are still flashing buy signals, at least for the moment.

Headwinds

Yet despite all this, at the time of writing, the FTSE 100 has fallen by more than 2%, back below the 7,000 mark. Weak data from China, political turmoil surrounding Greece and the airstrikes in Yemen have added to a sense of risk aversion that has hit markets.

The FTSE 100 has had a good run so far this year, up more than 6% despite the sell-off. In all likelihood, good old-fashioned quarter-end profit taking has no doubt had an influence on the FTSE 100’s recent decline.

But will the sell-off continue? Probably, as a number of support levels have already been breached. Yet, as I highlighted previously, from a technical viewpoint there is a strong support level around 6,695 which I would be a little concerned if it was breached. If it isn’t then the market should find a support to build upon.

Putting the global geopolitical risks to one side, there is a political risk to the FTSE 100 much closer to home. The outcome of next month’s General Election will likely dictate the fortunes of the FTSE 100 in the short term.

To gain an insight into how it might possibly do so then let’s look at how General Elections have affected UK shares historically.

The impact of a General Election on the FTSE

The FTSE 100 is a relatively new index (starting in 1983) so analysing its reaction to General Elections since then would only provide limited data. However the FTSE All Share (of which the FTSE 100 is one component) goes back as far as 1963. And to give you an idea of how closely the two are related the correlation figure between them is 0.99 (so they pretty much move together).

So how might the FTSE 100 fare in the coming months. Well, the chart below from the stock market almanac, shows how the FTSE All Share has performed, on average, in the months leading up to and after a General Election (click to enlarge):

 

anotherThe-UK-Stock-Market-in-General-Election-Years

If history repeats then we should expect the FTSE 100 to fall by around 2% over the coming months.  A lot depends on the outcome and a drawn out period of uncertainty. If there is no clear winner come May then this is unlikely to prove positive for markets. But does it matter who wins? The almanac chart below looks at the overall return for the entire election year in which an Election occurs.

The-UK-Stock-Market-in-General-Election-Years

On the face of it, a Conservative win is often positive for markets. But more broadly in 12 out of 17 Election years since World War II the market has gone up. In fact, the average return of the positive years is around 3%. Assuming a similar positive response after this year’s election we’d be looking at a closing figure for the FTSE 100 of around 6,760 by the end of 2015, given that it started the year at 6,566.

So to sum up

In the short term the outlook for the FTSE 100 is pretty muted. As long as the index holds above 6,700, odds are that we likely to range trade for a while. To drive the FTSE 100 well beyond 7,000 (and it is a real possibility) company fundamentals need to catch up with valuations. In the absence of geopolitical events and uncertainty in the UK General Election that could spark a sell-off there is nothing to stop the FTSE 100 testing new highs this year.

 

Image courtesy of Michelle Meiklejohn at FreeDigitalPhotos.net

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Watchdog to ban pre-ticked insurance products that cost consumers £100m a yearhttp://moneytothemasses.com/news/watchdog-to-ban-pre-ticked-insurance-products-that-cost-consumers-100m-a-year http://moneytothemasses.com/news/watchdog-to-ban-pre-ticked-insurance-products-that-cost-consumers-100m-a-year#comments Fri, 27 Mar 2015 11:41:25 +0000 http://moneytothemasses.com/?p=18705 Watchdog to ban pre-ticked insurance products that cost consumers £100m a year The selling of insurance ‘add-ons’ that are pre-ticked on application forms are to be banned by the FCA. The FCA found that about one in five people don’t even realise they are purchasing the ‘add-on’ insurance cover costing consumers more than £100m every year...

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Watchdog to ban pre-ticked insurance products that cost consumers £100m a year

man on computerThe selling of insurance ‘add-ons’ that are pre-ticked on application forms are to be banned by the FCA.

The FCA found that about one in five people don’t even realise they are purchasing the ‘add-on’ insurance cover costing consumers more than £100m every year

What are pre-ticked insurance products?

Pre-ticked insurance products are add-on products such as legal expenses cover and breakdown cover where the option for these products is already ticked on the application form. This opt-out form of product selling means that consumers are often not giving the purchase of this product enough thought or simply do not realise the cover has been automatically added in to the price.

What types of insurance products will be covered under the FCA ban?

The FCA ban will apply to any add-on products such as legal expenses sold with home insurance, breakdown or key cover sold with motor insurance and protection cover when taking out a mortgage or credit card. Companies will also be required to show the annual price of insurance products not just the monthly alternative. This is most likely to affect the mobile phone market where phones are typically promoted on a monthly price basis. The Financial Ombudsman Service has reported numerous cases where buyers of mobile phones have had insurance products costing up to £70 a year automatically added to their contract without the buyer’s knowledge.

When will the ban on pre-ticked insurance products come in to force?

There will be a period of consultation with consumer and industry bodies with a view to agreeing remedies by the end 2015 followed by an accelerated timetable for implementation.

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Are contactless payment cards safe and secure?http://moneytothemasses.com/quick-savings/shopping/are-contactless-payment-cards-safe-and-secure http://moneytothemasses.com/quick-savings/shopping/are-contactless-payment-cards-safe-and-secure#comments Wed, 25 Mar 2015 09:17:13 +0000 http://moneytothemasses.com/?p=18699 Are contactless payment cards safe and secure? Using a contactless payment card is becoming a more popular method of paying for small transactions such as a cup of coffee or a bus journey. Despite this form of payment being offered by more organisations many consumers are still reluctant to embrace this new method due to perceived...

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Are contactless payment cards safe and secure?

Are contactless payments safe and secure?Using a contactless payment card is becoming a more popular method of paying for small transactions such as a cup of coffee or a bus journey. Despite this form of payment being offered by more organisations many consumers are still reluctant to embrace this new method due to perceived security issues.

So is there any need to worry about  the safety and security of contactless payment cards?

What are contactless payment cards?

  • Contactless payment cards allow the payment of small transactions without having to enter a PIN as authorisation, thus making transactions quicker
  • Just holding a contactless card over a contactless enabled terminal will authorise a transaction
  • Contactless payment cards were first issued in 2008 and since that time their usage has grown rapidly. In December 2014 46.1 million contactless payment transactions were made for a total of £380.8 million
  • There are well over 200,000  terminals in the UK where contactless payments can be made with an average transaction of £8.26
  • Currently the maximum individual transaction amount is £20 but this is to be increased to £30 in September 2015

Are there any security concerns with contactless payment cards?

  • The individual transaction maximum is currently set at £20 so if a card is lost or stolen then the amount of loss is limited
  • Thieves or fraudsters cannot get access to any cardholders information or accounts from the card and need the actual card to carry out transactions
  • After a series of transactions a user may be asked to enter a PIN to prevent stolen cards being used for any period of time
  • Reported cases of alleged fraud are very small and many of these could be down to terminal malfunction or incorrect usage

What actions can should I take to keep my contactless payment card safe and secure?

  • Always keep your card in a wallet and only use a single card when paying, keep other cards away from the terminal
  • Keep your wallet, purse or handbag away from contactless terminals to avoid accidental payments
  • If your card is lost or stolen report it to your bank immediately
  • Keep receipts of payments so you can check these against your bank statements to ensure there are no unknown transactions

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Latest interest rate predictions – when will rates rise?http://moneytothemasses.com/owning-a-home/interest-rate-forecasts/latest-interest-rate-predictions-when-will-rates-rise http://moneytothemasses.com/owning-a-home/interest-rate-forecasts/latest-interest-rate-predictions-when-will-rates-rise#comments Tue, 24 Mar 2015 13:01:39 +0000 http://moneytothemasses.com/?p=12789  This article is continually updated to bring you the latest analysis on when interest rates are likely to rise. You can now enter your email address here to receive updates to your inbox. Also at the bottom of this article I tell you how to quickly calculate the impact of an interest rate rise on your...

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bank of england This article is continually updated to bring you the latest analysis on when interest rates are likely to rise. You can now enter your email address here to receive updates to your inbox.

Also at the bottom of this article I tell you how to quickly calculate the impact of an interest rate rise on your own monthly mortgage payments.

If you are wondering whether you should fix your mortgage rate, but don’t know a mortgage adviser whose opinion you trust, then we’ve team up with an award winning mortgage advisory firm to provide fee-free expert mortgage advice. The service, which I’ve personally vetted, compares thousands of mortgages here* plus you can see the current best-buy mortgages as well.

When will interest rates go up?

In summary: in recent months the market consensus of when the Bank of England’s first interest rate rise would occur has dramatically shifted. At the start of the year the consensus had been for the first rate rise to occur in the second half of 2015 but weak economic data and falling inflation, because of a collapse in the price of oil and a strong pound, has seen this pushed back. Now interest rates are not expected to rise until the start of 2016 at the earliest, but more likely in the summer of 2016. In fact some areas of the market are pricing in interest rates to rise in the latter part of 2016 after Mark Carney suggested that another interest rate cut can not be ruled out! See bullet points below for more detail. Also enter your email address here to receive interest rate updates to your inbox.

The forecasting of the Bank of England base rate has been transformed in recent years. First of all Mark Carney, the Governor of the Bank of England (BOE), issued new ‘forward guidance’ on when the Bank of England will raise interest rates.

This is a policy which he employed during his previous role in Canada’s central bank to try and control the market’s expectations of when interest rates will rise. The reason for doing this is that an expectation of a rate rise is as important as the actual rate rise itself. If a market thinks that the BOE will increase rates then the cost of borrowing throughout the economy will rise. This can prove damaging for a stuttering economic recovery, meanwhile artificially low interest rates also make cash deposits unattractive, which in turn boosts consumer and corporate spending.

Mark Carney originally created a notional link between the UK unemployment rate and the BOE base rate. In a pledge to keep rates lower for longer Mark Carney said that rates would not rise until UK unemployment fell below 7%. But this threshold was hit, somewhat unexpectedly, so Mark Carney had to ditch the unemployment trigger when it looked like a breach was imminent, instead replacing it with 18 economic indicators.

So now Mr Carney has moved the goal posts on when interest rates will likely go up:

  • The BOE has now decided it won’t tie interest rate rises to any particular economic indicator but a range of 18 of them.
  • Throughout 2014 Mark Carney kept the markets guessing over when interest rates are likely to go up again. After much speculation that interest rates would go up in 2015 this now seems unlikely because inflation has now fallen to 0% (the lowest reading since records began)largely due to a plunging oil price.
  • Yet Mark Carney is keeping the market guessing as to what the Bank of England’s next move will be. In his latest inflation report he suggested that the BOE could start printing money again or cutting interest rates further if inflation does not pick up soon! The market wasn’t expecting that at all.
  • At the start of 2015 the market had priced in that interest rates would go up in the second half of 2015 at the very earliest, but now 2016 is looking much more likely.
  • But another reason why a rate rise might seem a more distant prospect is that until recently minutes from the BOE rate setting meetings had shown that two committee members had started voting for a rate rise. Amazingly, minutes from January’s meeting showed that the two dissenters had changed their minds and the committee was now again unanimous on keeping rates on hold. Markets immediately pushed out their predictions of when interest rates will rise back into 2016.
  • But a word of warning, when interpreting its annual survey of household finances, the BOE claimed that the majority of mortgage borrowers could cope with a 2% interest rate rise. Yet, just a year earlier similar survey results were interpreted as showing that borrowers would struggle if rates were raised to 2%. This is a complete change in rhetoric and had been taken as an indication that the BOE would look to increase interest rates by Autumn 2015. But the recent change in voting by the MPC has changed things.
  • Also because December’s inflation figure was so low Mark Carney had to write to the Chancellor, George Osborne, to explain why (he had to again because of January’s low inflation figure and will also now have to explain February’s low inflation figure). It was in this letter that Carney suggested that the boost to the economy that the low oil price will give could mean that he will have to in fact increase interest rates again sooner that the market thinks.
  • Either way, Mark Carney keeps reiterating that when rates do rise it will be gradual and, in the medium term, materially below the 5% level set on average by the BOE historically. It is expected that the first interest rate rise will occur in early 2016, at the earliest, to 0.75% followed by further 0.25% increases at regular intervals.

So the current forecast of when interest rates will go up is: Markets are now pricing in the first rate rise (to 0.75%) to occur in the first half of 2016 with interest rates remaining below 2% in 2017 and beyond.

Whilst the BOE is now claiming that not just one economic indicator will be used in any ‘forward guidance’ of when rates will rise, a range of them will still determine when they actually do put them up. So economic indicators are still important in judging when interest and mortgage rates are likely to rise. Below is a roundup of the most important indicators which will influence when interest rates go up:

So what might influence when rates rise, despite the change in the BOEs ‘forward guidance’  

  • Inflation has unexpectedly fallen – in February the official measure of UK inflation fell to 0%, the lowest figure since records began back in 1988. That means that the cost of living is exactly the same as it was this time last year. Inflation has tumbled in recent months, the biggest reason being the fall in the price of oil. The oil price has almost halved since last summer meaning cheaper petrol at the pumps for consumers. We have even seen the first petrol stations charging just £1 a litre. Inflation doesn’t look like spiking any time soon either and Mark Carney has admitted as much in his latest inflation report. In fact, Mark Carney correctly predicted that inflation would fall to below 0%. However, if the CPI measure of inflation falls below 0% it will be the first time it has done so in 50 years! Don’t forget that the Bank of England’s target inflation rate is 2% (with anything above 3% or below 1% getting a slapped wrist from the Chancellor). To combat inflation interest rates would be increased but the prospect of low inflation for the foreseeable future has fuelled speculation that the first interest rate rise will now not occur until well into 2016.
  • No official support for a rate rise – between August and December 2014 the Bank of England’s Monetary Policy Committee (MPC), who are the people who decide the UK base rate, were not unanimous in their support for holding interest rates at 0.5%. In fact, 2 out of the 9 committee members consistently voted for a rate rise. However since January’s MPC minutes the voting has once again become unanimous (9-0) for holding rates. This is a dramatic turnaround (a result of fears over falling inflation) and was taken as a sign that the date of the first rate rise has been pushed back at least until 2016. Just months earlier the BOE had been claiming that only 4% of mortgage borrowers would struggle to cope with a 2% rate rise. Such positive PR was seen as suggesting that the BOE was paving the way for interest rates to start going up sooner rather than later. However, within the latest MPC minutes the committee said “it was more likely than not that the Bank Rate would increase over the next three years” amid growing concerns over the strength of the pound, which could cause inflation to fall further. The upshot is that an interest rate rise in early 2016 is now looking far from certain.
  • The UK economy is growing again –  the Office of National Statistics has confirmed that the UK economy grew by 2.6% in 2014 (the best year since 2007) and makes the UK the fastest growing industrialised economy in the world!  Economic growth is already back at its pre-crisis level. However, a growing economy increases the prospect of a rate rise and what has surprised a few people is that Mark Carney is worried that the low oil price could in fact see economic growth rates soar and force an early rate rise.
  • There’s cautious optimism about future economic growth – be it the UK services, manufacturing or construction, official data has pointed to improved signs of economic recovery. However, the services sector which accounts for about 75% of the economy, saw an unexpected slip in activity at the end of 2014. The sector is still growing strongly but it has raised concerns over the prospects for the UK economy. However, if the economic recovery continues to strengthen then interest rates will rise sooner and faster than suggested by the official guidance.
  • Unemployment is falling – The number of people out of work fell by 102,000 to 1.86 million (a six-year low) in the three months to January. The UK unemployment rate now sits at 5.7%, below the BOE’s old ‘forward guidance’ threshold, a threshold the BOE hadn’t expected to be breached until 2016. But interestingly wage growth now finally exceeds inflation – a trend we last saw back in 2009. In fact average earnings grew by 1.8% which is comfortably above the current rate of inflation . A lack of wage growth is a sign of slack in the economy which would make an early rate rise less likely. But if wage growth continues to improve then calls for an interest rate rise will increase.
  • UK economic growth forecasts are being upgraded – such is the optimism for UK economic growth that the British Chambers of Commerce, the BOE as well the International Monetary Fund (IMF) have upgraded forecasts for economic growth. The Chancellor George Osborne even upgraded his forecasts for UK economic growth in his Budget 2015. He now expects the UK economy to grow by 2.5% in 2015, which is slightly higher than the 2.4% he originally forecast in his Autumn Statement.

So should you rush to fix your mortgage now while rates are low?

Fortunately I’ve answered this question in my  post ‘Should you fix your mortgage rate now?‘ But if you want more help or advice then you can contact an award winning mortgage adviser here*.

Interest rate rise / fall calculator – calculate the impact on your monthly mortgage payments

You can quickly calculate the impact of an interest rate rise on your mortgage payments in pounds and pence by using this interest rate rise calculator*. Just make sure you enter the original details of your mortgage, such the original amount you borrowed and the original term. This will ensure that the starting monthly mortgage payment matches yours. Then simply enter different interest rate rises and you will see how your monthly mortgage payments will change. Now that you know the answer don’t just bury your head in the sand about it, take action and review your mortgage options today.

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The 7 funds for consistent returnshttp://moneytothemasses.com/8020-articles/the-7-funds-for-consistent-returns http://moneytothemasses.com/8020-articles/the-7-funds-for-consistent-returns#comments Fri, 20 Mar 2015 12:28:11 +0000 http://moneytothemasses.com/?p=18671 I’m fundamentally opposed to buying and holding funds for the long term as you can make more money by regularly reviewing them. However, I understand that there are times when you might not want to or can’t switch your funds as often as you might want. For example you may have a pension scheme which...

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eclipseI’m fundamentally opposed to buying and holding funds for the long term as you can make more money by regularly reviewing them.

However, I understand that there are times when you might not want to or can’t switch your funds as often as you might want. For example you may have a pension scheme which offers a limited choice of funds or restricts the number of switches you can perform. Or it may be that you like to have a core stable selection of funds in your portfolio around which you more actively invest to boost returns.

Interestingly this week I was asked by a journalist for some funds that might be worth buying and holding. You may recall I wrote a piece earlier in the year titled Funds to ‘buy & forget’ in 2015 & the Perfect Portfolio. In that piece of research I focussed on funds that had performed well yet managed to ride the recent market sell-offs.

But what about if we look at a longer time frame and focus more on outperformance rather than capital preservation? In other words, are there any funds out there that seem to consistently outperform their peers? But on top of that are there any that are also good momentum plays right now as identified by our 80-20 Investor algorithm?

Long term outperformance screen

It’s a fact that 90% of fund managers fail to beat the market over the long term which has been shown by numerous pieces of research. Yet there are a few that have. However, judging overperformance or underperformance based on an arbitrary timeframe can give a skewed result.

So instead I decided to analyse the performance of every unit trust out there (over 2,000 of them) versus each other over multiple time frames to produce a shortlist. I then looked at the data and only shortlisted those funds that outperformed the average of their peer group (sector) over the following time periods

  • 1 year
  • 3 years
  • 5 years
  • 10 years (to include data pre-financial crisis)

Then to include an element of consistency the funds also had to show a similar level of outperformance in each of the last 5 years.

I also wanted to make sure that they were genuinely beating the market rather than simply doing better than their dud peers. So I also added a few screens which give an indication of fund manager skill. This would limit the likelihood that a fund manager had simply managed any outperformance by taking excessive risks in a rising market. These additional screens were namely:

Alpha

Alpha is a figure which measures a manager’s apparent skill at picking winning investments versus their benchmark. Alpha is the excess return versus the return of a fund’s benchmark (i.e the market). So a fund with a positive alpha indicates that the fund manager has outperformed through skill. While a negative alpha figure would indicate underperformance.

Sharpe ratio

The sharpe ratio is not a widely known statistic yet it indicates how much extra return a fund manager has achieved for the increased risk they have taken. There is nothing wrong with fund managers taking calculated investment risks if they result in additional returns for investors. So the higher a fund’s sharpe ratio the better.

Maximum Drawdown

Finally I analysed how the funds had performed over the last 3 years and what the maximum fall during the period was for each fund. I then only included those with the lowest drawdowns versus their peers. 80-20 Investor tables include the drawdown figure (Max Fall) as it is useful but not published widely.

80-20 Investor algorithm screen

The above screening left less than 40 funds (out of 2,200 funds) which have shown a consistency of return over the medium to long term (in various market conditions), yet doing so without taking unnecessary risk.

Yet where this becomes interesting is when we run the above funds through the 80-20 Investor algorithm to identify those funds that also have momentum. That produces a shortlist of just 7 funds across a range of sectors. All these funds have either currently in or have recently appeared in 80-20 Best of the Best portfolio or the Best Funds by Sector tables.

So a bit like today’s solar eclipse, when two things (a track record of consistency of returns and momentum) line up, as they have for these funds, it certainly makes for interesting investing.

The result

Name1 year return3 year returnMax FallAnnual ChargeSector
First State – Asia Pacific Leaders29.3337.26-12.081.55Asia Pacific Excluding Japan
GLG – Continental Europe10.354.8-14.411.77Europe Excluding UK
M&G – Japan22.3546.03-14.111.71Japan
Baillie Gifford – Japanese17.1356.67-10.951.53Japan
Old Mutual – North American Equity26.7176.77-4.561.75North America
Invesco Perpetual – High Yield2.5735.99-2.971.44Sterling High Yield
Jupiter – UK Growth9.3171.12-8.911.79UK All Companies
all performance figures are net of charges

 

The material in any email, the MonetotheMasses.com website, associated pages / channels / accounts and any other correspondence are for general information only and do not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation. See full Terms & Conditions and Privacy Policy
Neither MoneytotheMasses.com/80-20 Investor nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Funds invest in shares, bonds, and other financial instruments and are by their nature speculative and can be volatile. You should never invest more than you can safely afford to lose. The value of your investment can go down as well as up so you may get back less than you originally invested.
Information provided by MoneytotheMasses.com/80-20 Investor is for general information only and not intended to be relied upon by readers in making (or not making) specific investment decisions.
Appropriate independent advice should be obtained before making any such decisions. Leadenhall Learning (owner of MoneytotheMasses.com/80-20 Investor) and its staff do not accept liability for any loss suffered by readers as a result of any such decisions.
The tables and graphs are derived from data supplied by Trustnet. All rights Reserved.

 

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5 secrets of a successful DIY investor (that the City doesn’t want you to know)http://moneytothemasses.com/saving-for-your-future/investing/5-secrets-of-a-successful-diy-investor-which-the-city-dont-want-you-to-know http://moneytothemasses.com/saving-for-your-future/investing/5-secrets-of-a-successful-diy-investor-which-the-city-dont-want-you-to-know#comments Fri, 20 Mar 2015 09:59:29 +0000 http://moneytothemasses.com/?p=18742 In this article I am going to give you access to the 5 secrets of DIY investing including the tools and techniques used by investment professionals, which they’d rather you didn’t know. I regularly provide commentary for the national press (including the likes of The Daily Mail, The Telegraph or The Times) and provide investment tips...

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diy investing tipsIn this article I am going to give you access to the 5 secrets of DIY investing including the tools and techniques used by investment professionals, which they’d rather you didn’t know.

I regularly provide commentary for the national press (including the likes of The Daily Mail, The Telegraph or The Times) and provide investment tips and advice for DIY investors.

In doing so I draw upon my career in analysing investments, building investment portfolios for clients and talking to fund managers (the people who essentially run your pension funds or investments). I can honestly say that there has never been a better time to join the growing band of DIY investors (armchair investors) and run your own money.

It may surprise you (and worry the financial firms who overcharge people to manage their investments) that around a third of investors now run their own money without employing the services of a financial adviser.

The reason why people are now waking up to the possibilities of DIY investing is because it is feasible to successfully run your own money with very little time or effort, despite what you are lead to believe. In fact, the effort needed to become a better investor can be distilled down to just a few minutes a month, and what is more it is relatively easy to outperform most of the investment professionals who want to charge you a fortune yet don’t even beat the market.

There has been a sea of change in the last decade that has empowered DIY investors. Firstly competition from fund providers and platforms (the companies through which you buy investment funds) has driven down the costs of going it alone. In addition, technology now makes it possible to get instant valuations of your portfolio and make changes within seconds, something we could only dream about just a few years ago. There is now more information available than ever to empower DIY investors thanks to the internet which is shining a light on the poor deal that investors have had up until now. Fund managers are finding it more difficult to hide their poor performance. Yet despite the advances DIY investors can feel overwhelmed by this new world of opportunity.

That is why I’ve pulled together 5 secrets of successful DIY investing which are aimed at both the complete novice as well as experienced investors.

The 5 secrets of a successful DIY investor

1. Understand risk

Whether you are new to investing or not you need to understand investment risk and your own risk profile (i.e how much risk you are comfortable taking). I strongly suggest that you read this brief investment guide* (it’s one of the best I’ve come across) which takes you through understanding investing and your own risk profile. Best of all it’s completely FREE.

2. Be tax savvy

Successful investors keep as much of their profits for themselves as possible. Profits on investments are liable to capital gains tax (which is as much as 28%). However by investing via a pension or a Stocks and Shares ISA (often called an investment ISA) will mean that your profits are tax-free. Whether you choose a pension or an investment ISA will likely depend on whether you need access to your funds or not. With a pension you can’t access your money until you are 55 whereas you can withdraw cash from a Stocks and Shares ISA at any time.

3. Keep costs down

When you invest there are a range of charges that are taken out of your investments including the fund management charge (charged by the fund) and the platform fees. A fund platform is the company which enables you to buy the funds of your choice. Think of it like a supermarket which sells funds. Some fund supermarkets are more expensive than others. Which is the best fund platform through which to buy your investments will vary from person to person depending on the size of their portfolio and the service they are after. Have a read of my article The best stocks and shares investment ISA (& the cheapest fund platform). Just to put the effect of charges into context, if you invested £100,000 and reduced the overall annual charges you paid by just 0.5% you would be £20,000 better off after just 20 years.

4.  Don’t invest based on headlines or mantras

It may seem counterintuitive for an investment commentator to advise you to not follow everything in the investment press. Often commentators try and rationalise every fluctuation in investment markets and then draw predictions about where best to invest your money. However, sometimes you can’t explain everything that happens in investment markets, so attempting to formulate conclusions on how assets will move in future is ill-advised.

Yet, even if it seems justified to draw conclusions, the market (which is just a bunch of irrational investors after all) may suddenly switch its interpretation of events meaning that your predictions/conclusions are now completely wrong. Take, for example, the relationship between the dollar and the US stock market. In recent years when equities fell (perhaps over economic fears) the dollar rallied because it was seen as a safe haven by the market. That relationship seemed set in stone. But in recent months the market’s view has suddenly shifted and it now thinks that too strong a dollar could actually be bad news for exporters and long term economic prospects meaning that market participants tend to sell the US stock market when the dollar rallies. This change in mindset has meant that a previous investment mantra has now been turned on its head and it’s cost some traders a lot of money.

5. Stick to a simple yet proven strategy

The most successful investors have an investment process and stick to it through thick and thin. Warren Buffett, the most successful investor ever (and now a billionaire) is a good example of this. But what strategy should you choose when running your own money?

It is this question that I looked to answer when analysing the performance of (plus talking to) fund managers and looking at the tools and strategies the most successful managers use. On top of that thousands of academic papers have been published on the topic some of which have analysed investment markets going back as far as 100 years. Yet it is possible to distil this down so that you can invest your money with just a few minutes effort a month.

It is exactly how I invest my own money.  From my research I discovered:

  • The one thing keeping investment professionals up at night
  • The most important skill in fund management
  • Why fund managers underperform & the 1st advantage DIY investors have over them
  • The second advantage you have over professional fund managers
  • The simple tool to help you beat the market
  • The most important investment lesson you will ever learn
  • The investment process fund managers want to keep to themselves
  • Finally answered the question of whether passive or active investing is best
  • Why you should stop reading the money pages & how to build a portfolio

So I’ve created a FREE short series of emails that show you the techniques and tools that turned £100,000 into £1.1 million. It’s FREE for a limited time only and covers the above bullet points. Each of the concise emails will take you just 2 minutes to read and will tell you the simple techniques and tools the City fund managers use – which you can now use too. Plus, you will also receive a FREE ebook ’39 simple ways to pay less tax’.

As I mentioned it is completely FREE and you can take the lesson contained within the emails to help you run your own money. Good luck.

(image by stockimages – freedigitalphotos.net)

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Budget 2015 bullet point summaryhttp://moneytothemasses.com/news/budget-2015-summary-in-bullet-points http://moneytothemasses.com/news/budget-2015-summary-in-bullet-points#comments Wed, 18 Mar 2015 16:36:38 +0000 http://moneytothemasses.com/?p=18663 Budget 2015 bullet point summary George Osborne has unveiled his final Budget before the general election. So what was in this year’s budget and what will this mean for you. Income tax Personal allowance is to go up from £10,000 to £10,600 this year (which was previously announced), £10,800 in 2016 and £11,000 in 2017/18....

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Budget 2015 bullet point summary

Budget 2015 bullet point summaryGeorge Osborne has unveiled his final Budget before the general election. So what was in this year’s budget and what will this mean for you.

Income tax

  • Personal allowance is to go up from £10,000 to £10,600 this year (which was previously announced), £10,800 in 2016 and £11,000 in 2017/18. The personal allowance is the amount of money you can earn before you start paying tax and applies to everybody earning up to £100,000. This allowance is reduced when earnings are above £100,000, for every £2 of income the personal allowance is reduced by £1.
  • Higher rate tax threshold to increase to £43,300 in 2017. Currently it is £41,865 and is already due to increase to £42,385 in April.
  • The transferable tax allowance for married couples will increase from the current £1,050 to £1,100.
  • Annual tax return will cease to exist within the next five years. Tax affairs of millions of Britons will be held online and collated from information held by employers, banks and investment firms.

National Insurance

  • Class 2 National Insurance contributions to be scrapped in next Parliament.

Pensions

  • Pension lifetime allowance is to be reduced again, this time from £1.25m to £1m after April 2016, while from 2018 this allowance will rise with inflation. The lifetime allowance is the maximum amount of pension that can be paid out without triggering a tax charge.
  • From April 2016 people already receiving income from an annuity will be allowed to sell that annuity to a third party, subject to agreement from the annuity provider. This will allow those currently locked into an annuity the pension freedoms announced in last year’s Budget that come into effect from 6th April 2015.

Inheritance tax

  • Government to review the use of ‘deeds of variation’ which allow wills to be altered after the donor’s death.

Savings

  • The first £1,000 of interest on savings will be free of tax removing the vast majority of savers from taxation, this is limited to £500 for higher rate taxpayers.
  • A new Help to Buy Isa will allow prospective first-time buyers to get a bonus when saving for a deposit, a bonus of £50 will be added to every £200 saved up to a maximum of £3,000.
  • Changes will be made to Isa rules to allow savers to take out money and put it back at a later date without losing the tax-free status.

Duty

  • Increase on fuel duty planned for September will be scrapped.
  • Duty on beer will be cut by 1p on a pint and 2% on cider and spirits, duty on wine remains unchanged.

 

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