Money To The Masses http://moneytothemasses.com Putting you in control Thu, 27 Nov 2014 08:53:55 +0000 en-GB hourly 1 51 Christmas money saving tipshttp://moneytothemasses.com/quick-savings/tips/51-christmas-money-saving-tips http://moneytothemasses.com/quick-savings/tips/51-christmas-money-saving-tips#comments Wed, 26 Nov 2014 07:20:12 +0000 http://moneytothemasses.com/?p=17556 51 Christmas money saving tips 1.Cut down your present list – You don’t really need to buy for every member of your family and all your friends, just agree to  only buy presents for children and save yourself time, money and stress. 2. Don’t take your children Christmas shopping – Apart from the fact that will...

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51 Christmas money saving tips

51 Christmas money saving tips1.Cut down your present list – You don’t really need to buy for every member of your family and all your friends, just agree to  only buy presents for children and save yourself time, money and stress.

2. Don’t take your children Christmas shopping – Apart from the fact that will get bored, taking your children on a shopping trip will simply mean that they will see more ‘must have’ present to add to their list.

3. Set a budget to spend on presents – read my article – Manage your shopping with great smartphone apps to help you set a budget and keep organised.

4. Search for the cheapest deals – read my article – 10 alternative websites to slash your Christmas shopping bill.

5. Stop your children watching TV adverts – I know it’s easier said then done but TV adverts encourage parents to spend more money that they planned to as they strive to please their little cherubs. Get your children watching BBC (advert free) or DVDs to try avoid the commercial bombardment.

6. Hit the pound shops – Obviously, as the name suggests, you can pick up some great bargains but you can also parcel together a number of items to make a more substantial present at little cost (think colouring books, pencils and craft stuff). They are even selling Frozen merchandise this year.

7. Make your own presents – You can make your own presents at little cost. There are many videos available to show you how. Watch this one to get inspired.

8. Buy your presents after Christmas – If you are not seeing people until after Christmas then why not buy their presents in the post-Christmas sales to save money.

9. Don’t buy food that won’t get eaten – At Christmas we buy food just in case somebody might fancy it sometime over Christmas. Let’s face it, people will only eat figs as a last resort, so don’t buy them!

10. Make your own decorations and gift tags – Decorations and gift tags can be very expensive so why not make your own. Watch this video to get inspiration – How to make Christmas gift tags

11. Use your loyalty points – We probably all collect loyalty points but saving these points up to spend during the run up to Christmas will have a significant impact on your budget. Read my posts Reclaiming forgotten loyalty points.

12. Be voucher hunter – Be on the lookout for vouchers everywhere, magazines, newspapers, online and in stores. Sign up for a voucher site such as VoucherCodes.co.uk or vouchercloud

13. Hand deliver your Christmas cards – Try and use the postal service as little as you can and hand deliver cards whenever possible. Maybe deliver a number to one person to pass on to other friends and family and you can do likewise for them.

14. Do a secret Santa – Set up a secret Santa with a group of friends, work colleagues or family and just buy one gift instead of spending out on gifts for everyone.

15. Start shopping early – Start early and you will pick up the pre-Christmas bargains, particularly on drink, sweets and snacks. This will save the last minute panic buy when you will spend too much on food you won’t eat.

16. Get designer clothes at high street prices – Read this article to find out more – How to get designer clothes at high street prices

17. Work out the value of everything – When in the flurry of Christmas shopping it is easy to get carried away read this article – How to work out the value of everything 

18. Give a personalised gift – A photo of a shared event in a simple frame will make a memorable but inexpensive present that is bound to be well received.

19. Do a decoration audit – Before you go out and buy more decorations do a thorough check on what you already have. Your loft is probably full of decorations that you got bored with or just forgot you had, see if you can use them again to save buying more.

20. Don’t always buy a new party dress/outfit – Check out the back of your wardrobe and try on your existing clothes before you decide you need something new. Don’t worry, nobody will realise it’s not new!

21. Shop online – Shop online and there is less temptation to go over your budget. Also if you need to exchange items you get a better deal online, read my article – Shop online to make sure you get your money back

22. Sell unwanted items – Now is the time of the year that everyone is looking for a bargain so why not sell your unwanted items on an auction site such as eBay to raise some much needed cash. Read this article to get you started – Top tips for selling on eBay

23. Ditch the turkey and try something cheaper – there is no written rule that says you must have a turkey at Christmas. Turkeys are expensive so why not try a cheaper alternative, I am sure the family will love to have something different for a change.

24. Make your own meals and freeze them – If you are entertaining over Christmas then providing food for all can be expensive. Why not make your own snacks and soups and freeze them ahead of the occasion, this will save you money as well as time on the day.

25. Use this smartphone app to pick up wine bargains – Buying wine can be very confusing are you getting value for money or just a cheap plonk. Read this article to find out the smartphone I never go wine shopping without – Buying wine? – get value for money with this new smartphone app

26. Club together – To save cost on food shopping why not club together with friends and family and bulk-buy at wholesale warehouses like Costco and save money.

27. Share the load, and the cost – If you are having friends and family round for a meal then why not spread the cost by asking them to bring something with them. Maybe a dessert or starter which will not only save you money it will also make the catering easier.

28. Use a cashback credit card – Use a cashback credit card and get money back on whatever you spend over Christmas, but make sure you clear the balance every month.

29. Don’t use store cards – Interest rates on store cards extortionate so don’t use them or you will be paying off your debts months after Christmas has gone.

30. Protect what you have – Make sure you have your possessions protected, read this article to find out more – Check your home insurance policy covers Christmas

31 Get free Kindle books – Read this article to find out more – The easy way to find the best free Kindle books

32. Get the best prices on the internet – Read this article to find out more – How to get the best prices when shopping on the internet

33. Compare supermarket prices online – do your food shopping online and use this browser add-on to get the best prices.

34. Take your own treats to the cinema or pantomime – if you are planning a trip the cinema or a show over Christmas make sure you take your own food and treats rather than buy them when you get there.

35. Make cash form your attic – If you think you have something interesting, and maybe of value, stored in your attic then why not turn it into cash. Read this article to get some ideas – The easy way to make cash from your attic

36. Save money on train travel – If you are travelling by train over the festive period then make sure you get cheap tickets. To find out more read this article – How to beat the train fare rises and get cheap tickets

37. Get the best deal on your holiday money – If you are going abroad over the holiday period then make sure you get the best deal on your money. For more information read this article – The best way to take money on holiday

38. Cut the cost of staying in a hotel – if your are planning to stay in a hotel during the Christmas period then you need to know how to keep the cost down. Read this article for some great tips – 10 tips to cut the cost of staying in a hotel

39. Fill up with the cheapest fuel – you will be surprised how much petrol you use at Christmas just shopping and visiting relatives. Make sure you get the cheapest petrol by reading this article – How to find the best petrol price in your area and cut your bill

40. Buy an artificial Christmas tree  – I know a real Christmas tree looks great but they are quite expensive. If you buy an artificial tree it will last you for years and you can get the perfect size for your room.

41. Take a packed lunch to work – I know preparing a packed lunch every day can be time consuming. But if you want to save some money ahead of Christmas then commit to taking a packed lunch to work in the preceding few weeks and you will be surprised at how much you can save.

42. Cancel the cappuccino – If you love your coffee then the amount you spend on a daily basis can soon mount up, so pledge to cut out your coffee leading up to Christmas to save money.

43. Swap skills – We all have hidden talents so why not swap your talents for other talents you do not possess. Why not bake some cakes for a friend in exchange for them making some decorations for your tree.

44. Send eCards and save on postage – Instead of buying cards and then paying out on postage why not send eCards instead. Sending a card electronically is becoming more popular and let’s face it, it’s the thought that counts. Try eCards as they have a great selection.

45. Don’t wait for the new year – stop smoking now! – Not only is smoking bad for your health it also costs a stack of money. Don’t wait for the new year to start your ‘no smoking’ resolution start now and you can put that money towards Christmas spending.

46. Include essentials in your children’s presents – Put essentials such as slippers, nightwear and socks in with your children’s presents to save you purchasing them in the new year.

47. Get money back when you shop online – You can get money back when you shop online by reading this article – Cashback sites – Make money when you shop online

48. Get a 0% credit card – If you get a 0% card you can use it to do all your Christmas shopping and pay the balance off after Christmas without paying any interest. Make sure you do pay off the balance otherwise Christmas will be even more expensive than you thought.

49. Change up all your loose coins – We all have loose coins lying around in drawers and containers so why not change them all up and spend the money at Christmas. Many supermarkets have change machines that can quickly count the money for you.

50. Make your own wrapping paper from unused wallpaper – We all have unused wallpaper lying around so why not use this as wrapping paper and present tags.

51. Plan for next year – You can save a lot of money by buying for next Christmas in the new year sales. Christmas cards, decorations and small gifts will all be cut price at this time of year. Also, why not start saving for next year by arranging a direct debit into a separate bank account to pay for next Christmas.

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How to calculate your net pay & check your tax codehttp://moneytothemasses.com/tax-advice/income-tax-2/calculate-net-pay-check-tax-code http://moneytothemasses.com/tax-advice/income-tax-2/calculate-net-pay-check-tax-code#comments Tue, 25 Nov 2014 08:53:55 +0000 http://moneytothemasses.com/?p=17632 How to calculate your net pay Simply enter your annual gross salary into the calculator below & click calculate. Click here to use the PAYE calculator How to calculate your net bonus (after taxes) Simply enter your annual gross salary and bonus into the calculator above & click calculate. Then run the calculator again but without...

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calculate your net payHow to calculate your net pay
  1. Simply enter your annual gross salary into the calculator below & click calculate.

Click here to use the PAYE calculator

How to calculate your net bonus (after taxes)

  1. Simply enter your annual gross salary and bonus into the calculator above & click calculate.
  2. Then run the calculator again but without including your bonus.
  3. The difference between the two figures above will equal your net bonus.

How to ensure you are on the right PAYE tax code

  1. Go to PAYE calculator above.
  2. Make sure the ‘tax year’ is set to the current one and the right age band is selected.
  3. Don’t worry about the ‘tax code’ field or the email field but fill/tick the others if relevant.
  4. Then enter your annual gross salary and click ‘calculate’.
  5. The calculator will tell you the net amount you should be receiving each month (or week) after tax and national insurance. If this number pretty much matches the net amountthat goes into your bank account each month (or the net amount on your payslip), that’s great. It would seem that you are paying the right amount of income tax and that you are entitled to the full income tax personal allowance (which is the amount you can earn tax-free).

But if the figure was not what you had expected then:

  1. Get your latest payslip.
  2. Check that there aren’t any deductions that you forgot to include in the calculator, such as pension contributions.
  3. If there aren’t then check the tax code printed on the payslip – it’s unlikely to be the bog-standard 1000L.
  4. Note down the tax code (made up of three numbers and a letter). Now go to http://www.hmrc.gov.uk/incometax/codes-basics.htm where you’ll find a full explanation of what your tax code means.
  5. If you think your tax code is wrong then contact HMRC and inform them of the error. If you’ve overpaid tax then you can expect a rebate via your pay packet.

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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, 23 Nov 2014 06:00:36 +0000 http://moneytothemasses.com/?p=16656 23rd November 2014 The Independent How to pay £100 a month rent in London Take a tour of Britain’s most unusual homes How much value do home improvements add to you property? The Telegraph London’s best mews properties The cost of ‘luxury’ property in London is now £4m Could shoddy DIY knock £60k off the...

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23rd November 2014

The Independent

How to pay £100 a month rent in London

Take a tour of Britain’s most unusual homes

How much value do home improvements add to you property?

The Telegraph

London’s best mews properties

The cost of ‘luxury’ property in London is now £4m

Could shoddy DIY knock £60k off the value of your home?

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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, 23 Nov 2014 05:30:48 +0000 http://moneytothemasses.com/?p=16650 23rd November 2014 The Independent Gold-plated pensions – the key to retirement freedom? Money round-up video There may be trouble ahead for cohabiting couples who don’t make a will The Telegraph How to get a guaranteed pension that lives on after you die Find out exactly how charities spend your money Pension mis-selling scandal hits...

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23rd November 2014

The Independent

Gold-plated pensions – the key to retirement freedom?

Money round-up video

There may be trouble ahead for cohabiting couples who don’t make a will

The Telegraph

How to get a guaranteed pension that lives on after you die

Find out exactly how charities spend your money

Pension mis-selling scandal hits 100,000 retired savers a year

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The latest MTTM Podcast – How to make it, How to save it, How to spend ithttp://moneytothemasses.com/news/podcast/latest-mttm-podcast-make-save-spend http://moneytothemasses.com/news/podcast/latest-mttm-podcast-make-save-spend#comments Sat, 22 Nov 2014 07:00:00 +0000 http://moneytothemasses.com/?p=15948 Welcome to the FREE MoneytotheMasses.com podcast. MTTM Podcast episodes You can listen to the latest episode of the podcast by clicking on the play button in the player below. To hear past episodes simply click on ‘More Episodes’ in the player’s top menu. Here is the full list of episodes: Episode 24 – Lost and found...

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Money to the Masses podcastWelcome to the FREE MoneytotheMasses.com podcast.

MTTM Podcast episodes

You can listen to the latest episode of the podcast by clicking on the play button in the player below. To hear past episodes simply click on ‘More Episodes’ in the player’s top menu. Here is the full list of episodes:

  • Episode 24 – Lost and found & selling your house for a pound
  • Episode 23 – Scams, spam and diet plans
  • Episode 22 – How to make £40,000 in 6 months
  • Episode 21 – Best ways to save for kids, cheap MOT trick, new tax disc laws & remortgaging
  • Episode 20 – How comparison sites work & car insurance quirks
  • Episode 19 – Changes to pensions & radio mentions
  • Episode 18 – Interest rate hikes & cashback sites
  • Episode 17 – Property Auction Tips And Money Regrets
  • Episode 16 – Christmas steals & train ticket deals
  • Episode 15 – Income protection, Private Jets and Investment Mantras
  • Episode 14 – Damien’s little nuggets (and the rules of money)
  • Episode 13 – Claiming Your Fuel Payment And Becoming A Field Agent
  • Episode 12 – Inside Estate Agents’ Minds And Back To School Finds
  • Episode 11 – Get a pay rise, credit myths & business start-up gems
  • Episode 10 – Lets talk about tax baby
  • Episode 9 – Buying, Selling And Letting Advice – The Property Special
  • Episode 8 – Huge Amounts on Current Accounts and You Can’t Go Wrong With Honest John
  • Episode 7 – Reader and Listener Question Special – Pensions, Trusts and IFA’s
  • Episode 6 – Big Picture Budgeting and The Fiver Challenge
  • Episode 5 – Organic Pear and Best Airfares
  • Episode 4 – Writing a Bestseller & Magnificent Melons
  • Episode 3 – House Buying Tricks and Life Insurance Tips
  • Episode 2 – Insider Secrets and DIY Investing
  • Episode 1 – Interesting Apps and Interest Rates

For those who don’t know, the show is jointly hosted by myself and Andy Leeks (author of the brilliant As They Slept – The comical tales of a London commuter) and aims to be informative as well as enjoyable. Every show is split into 4 sections:

  1. How to make money – covering ways to make money whether it be apps, websites, investing, business ideas or any way we can make you richer
  2. How to save money – this section teaches you how to not loose it. Be it saving, cutting bills, secret tricks or insurance
  3. How to spend money – this section covers how to spend it and how others do including celebrities.
  4. Reader / listener questions – I answer questions sent in by you guys!

Please have a listen below and if you do enjoy it then please thank us by downloading the podcast from itunes and leaving a 5 star review. I realise that you might listen to the podcast in the window below so be thinking ‘why the hell would I want to download it as I’ve already heard it once?’ Well by downloading it you will help push the show up the itunes charts and help us spread the word. Think of it as a thank you from you to us.

Download from iTunes

Alternatively here’s the show’s RSS feed – http://moneytothemasses.libsyn.com/rss.

Get in touch

If you want to get in touch, whether it’s a reader question or just to give feedback on the show then you can contact the show here.

Once again, please leave a review of the podcast on itunes here.

 

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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 Thu, 20 Nov 2014 11:00:39 +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: as recently as September the market consensus was that the Bank of England’s first interest rate rise would occur in the first few months of 2015. This has now shifted back due to recent poor economic data and falling inflation. Now interest rates are not expected to rise until mid 2015 at the earliest, after the general election. See bullet points below for more detail.

The forecasting of the Bank of England base rate has been transformed in recent months. 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 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
  • at the start of 2014 the market had thought that the the BOE’s first interest rate rise was unlikely to occur before the General Election in May 2015
  • But at the annual Mansion House Speech back in June Mark Carney dealt a shock by saying that rates could rise sooner than markets had priced in. Most people took that to mean late 2014 or the start of 2015.
  • Now he has completely changed tack after November’s inflation report suggested inflation would fall below 1% soon. Mark Carney now says that the market is right to rule out a rise in interest rates any time soon. The market has taken this to mean that interest rates won’t go up until the second half of 2015 at the earliest
  • Despite recent minutes from the BOE rate setting meetings show that two committee members have started voting for a rate rise recent, economic data suggests that UK growth prospects have faltered.
  • 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 summer or autumn of 2015 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%) in the second half of 2015 with interest rates increasing again to 1% in early 2016.

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 October the official measure of UK inflation rose marginally to 1.3%, up from 1.2% the month before. But the previous fall to 1.2%, a 5 year low, was unexpected. Don’t forget that the Bank of England’s target inflation rate is 2% (with anything above 3% getting them a slapped wrist from the Chancellor). To combat inflation interest rates would be increased. However, the BOE’s November inflation report stated that inflation could fall below 1% in the next six months. This has fuelled speculation that the first interest rate rise will now not occur until mid 2015 at the earliest.
  • Increasing official support for a rate rise?  – in August the Bank of England’s Monetary Policy Committee (MPC), who are the guys who decide the UK base rate, once again voted to keep the base rate at 0.5%. But what ruffled a few feathers was that the vote was not unanimous for the first time in 3 years. 2 out of the 9 committee members voted for a rate rise. Also minutes from a previous meeting suggested the BOE was ”surprised by the low probability attached to 2014 rate rise”. In September, October and November the 7-2 split remained suggesting that while an interest rate rise is on the way it’s perhaps more likely to be in 2015.
  • The UK economy is growing again –  the Office of National Statistics has confirmed that the UK economy grew by 0.7% in the third quarter of 2014. Although this is below the 0.9% recorded for the second quarter, it still 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.
  • 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. Importantly the services sector, which accounts for about 75% of the economy, has grown at its fastest rate for almost a year. However, a recent survey of British business confidence has shown it dip from its previous highs. But if the economic recovery becomes more entrenched analysts expect interest rates to rise sooner and faster than suggested by the official guidance.
  • Unemployment is falling – The number of people out of work fell by 115,000 to 1.96 million (a six-year low) in the three months to September. The UK unemployment rate now sits at 6%, below the BOE’s old ‘forward guidance’ threshold, a threshold the BOE hadn’t expected to be breached until 2016. But interestingly wage growth finally ticked up from previous historic lows and for the first time since 2009 has exceeded 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 in 2014. The IMF in particular now expects the UK economy to grow faster than any other major European economy in 2014, while the BOE now expects a growth rate of 3.5%.
  • Governor Carney is on a mission – Mark Carney took up the post of Governor of the Bank of England over a year ago and he is  making it clear that interest rates will not be rising until there is clear evidence that the economy is growing but more importantly that unemployment is falling. Both are now occurring but Mark Carney is concerned about falling inflation, so watch this space.

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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Best Junior ISA accountshttp://moneytothemasses.com/quick-savings/parents/best-junior-isa-accounts http://moneytothemasses.com/quick-savings/parents/best-junior-isa-accounts#comments Thu, 20 Nov 2014 09:33:43 +0000 http://moneytothemasses.com/?p=17317 The best junior ISA for cash If you are looking for the best junior cash ISA out there then make sure you look at the small print. With a lot of junior ISAs paying paltry interest rates then it pays to shop around, to benefit from the power of compounding interest over time. As a...

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best junior isaThe best junior ISA for cash

If you are looking for the best junior cash ISA out there then make sure you look at the small print. With a lot of junior ISAs paying paltry interest rates then it pays to shop around, to benefit from the power of compounding interest over time. As a guide if you are getting less than 2.5% (which seems to be the sweet spot for junior ISA accounts), you can certainly do better.

The Halifax Junior Cash ISA offers a headline grabbing 4% interest on junior ISA balances over £1. But this rate is only on offer if an adult Halifax cash ISA is held or the child is 16 and over.

But the Halifax own cash ISAs (NISAs) don’t pay market leading rates. Given that you can put £15,000 cash in a NISA, you will be better off getting a better rate on your own NISA rather than trying to keep everything with Halifax

Take their ISA Saver online which pays 1.25% AER. You can comfortably get 1.6% equivalent elsewhere by shopping around. If you used your full £15,000 NISA allowance that’s an extra £52 interest a year you’d be giving up just to secure an extra 1% (i.e £40) interest a year on the Halifax Junior Cash ISA (assuming you put the maximum £4,000 in this year). So in effect you’d be paying Halifax to get a better rate on your Junior ISA!

Having said that, if you don’t have a Halifax ISA then the junior ISA rate starts at 3% which is still one of the best rates out there.

But you can get better…….

Nationwide and Coventry Building Society both offer junior ISAs paying 3.25% AER. While neither use the the dreaded ‘bonus’ rate tactic they are variable which means is that they can drop the rate at any time, although Nationwide guarantee to not cut the rate below 1.15% before 31st January 2015 – hardly exciting! If you want to operate the account online then the Nationwide Smart Junior ISA is the one to go for. But if you want to transfer existing junior ISA savings in then the Coventry Building Society Junior Cash ISA is your best bet.

What about if you want to save and forget?

The other thing to point out is that there are limited range of Junior ISAs out there and even fewer offering a fixed deal. Of the few that do you are looking at around 1.9% AER for a 1 year fixed rate – so there is absolutely no point doing it.

But do people really need to take out junior cash ISAs?

The big positive of junior cash ISAs are that they are tax free. But don’t forget that interest on children savings accounts can be paid tax free if you complete an r85 form when opening a standard children’s savings account. This is because children get their own income tax personal allowance. The one caveat is that if the money paid in came from a parent then if the account earns over £100 interest a year then it is taxed at the parent’s marginal income tax rate. But if a grandparent, for example, is paying in then this rule doesn’t apply. So keep an eye on children’s savings account rates in case you can do better elsewhere. Those thinking of paying small regular amounts in each month (£10 to £100) might want to look at the Halifax Kids’ Regular Saver account which offers 6% AER gross for the first 12 months.

But if you or a spouse do not pay tax on savings interest then you could get a decent rate yourself. You could start saving via a high interest bearing current account, for example, with the best ones out there paying 5% AER (you can find the best rates here). For a basic rate tax payer that still works out at 4% per annum. There are even fixed rate bonds paying over 3%. Plus you keep control of the money as it’s in your name, unlike junior ISAs where you lose control of the money when the child hits 16 and they can withdraw the money at age 18.

There’s nothing to stop you saving outside of a junior ISA to get a better rate, even after tax, and then moving the money into a junior ISA over time, being mindful of the annual contribution limits.

Best Stocks and Share Junior ISA

If you want to invest the money via an investment junior ISA then the most important thing is to keep costs low otherwise they will eat into your nest egg. Compare annual charges as well as fund and dealing charges. Plus remember to check the transfer in and out charges (you may want to move away from the provider in the future).

Then look at the availability of funds. Some providers offer limited choices in this regard but the flip-side is that their overall costs are usually lower. Unfortunately there is no one investment junior ISA which is best overall. Those not bothered about investment choice might be attracted to the likes of Family Investments Junior ISAs which only offer a choice of two funds but charge around 1.5% per annum. If you plan on investing up to the maximum amount each year and want investment flexibility then look at the Investment Junior ISA offered by investment platforms such as the likes of AJ Bell or Hargreaves Lansdown, which offer
access to thousands of funds, but keep an eye on the charges.

Further reading

 

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Shop online to make sure you can get your money backhttp://moneytothemasses.com/quick-savings/tips/shop-online-make-sure-can-get-money-back http://moneytothemasses.com/quick-savings/tips/shop-online-make-sure-can-get-money-back#comments Mon, 17 Nov 2014 11:53:26 +0000 http://moneytothemasses.com/?p=17503 Shop online to make sure you can get your money back If you purchase items in a shop they are not obliged to give you your money back unless the goods are faulty. Online purchases, however, are covered by different rules under the Consumer Contract Regulations which provide the purchaser with additional rights to return...

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Shop online to make sure you can get your money back

http://www.dailymail.co.uk/money/smallbusiness/article-2836086/Small-firms-encouraged-make-use-Government-scheme-apply-Growth-Voucher-cover-half-cost-professional-advice.htmlIf you purchase items in a shop they are not obliged to give you your money back unless the goods are faulty.

Online purchases, however, are covered by different rules under the Consumer Contract Regulations which provide the purchaser with additional rights to return goods.

If you purchase a wrong sized item of clothing in a shop they are not obliged to give you a refund, if the item is not faulty. But if you had bought the item online, even if it’s from the same retailer, they HAVE to give you your money back even though it is not faulty. In fact, when shopping online you have more rights than if you shop in-store, as I explain below.

What are my rights under the Consumer Contracts Regulation?

The Consumer Contracts Regulation replaced the Distance Selling Regulations in June 2014 and cover purchases made online or away from a trader’s premises (e.g. at home or a place of work).

Goods purchased online

  • can be returned for any reason within 14 days of receipt and a full refund must be given by the supplier
  • once the 14 day period has expired the supplier must receive the goods back within 14 days
  • you should get a full refund within 14 days of the supplier receiving the returned goods or the purchaser supplying evidence of having returned the goods (proof of postage receipt)
  • a deduction can be made if the value of the goods has been reduced due to excessive handling (or wearing!)
  • the supplier must refund the basic delivery cost, if express delivery was requested then only basic delivery costs will be refunded
  • CDs, DVDs or software if the packing seal has been broken, perishable goods, tailor-made or personalised items are exempt
  • suppliers may increase the 14 day period so always check the terms and conditions prior to purchase

Services purchased online

  • any service purchased can be cancelled within 14 days from the purchase date
  • if you start using the service within the 14 day period then the supplier has the right to charge for any period of usage
  • if the service is provided in full within the 14 day period then cancellation rights can be lost
  • there are no legal rights to cancel hotel bookings, flights, car hire, concert/event tickets or where urgent repair or maintenance has been carried out
  • suppliers may increase the 14 day period so always check the terms and conditions prior to purchase

Digital downloads

The Consumers Contracts Regulation contains specific conditions covering digital content

  • suppliers must not provide the digital content within the 14 day period unless the purchaser has agreed to waive their cancellation rights
  • therefore consumers must acknowledge that once the download starts they will lose their right to cancel
  • it is important to make sure the software meets your requirements prior to purchase

What rights do I have if I purchase goods in a shop?

Goods purchased in a shop are covered under the Sale of Goods Act which give you the following rights.

All goods must be:

  • as described
  • of satisfactory condition
  • fit for purpose

If any of the above are breached the purchaser will be entitled to a full refund.

Many stores will have their own refund policy which must at least comply with the terms of the Sale of Goods Act. Often stores will provide a longer period to return any goods and may refund your money or provide a credit note for future purchases. Yet a number of stores only provide credit notes for in store purchases/returns but legally have to provide full refunds for purchases online (Reiss is a good example of this). So bear this in mind before you hand over your money in-store.

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Are bonds funds a good source of income? If so which ones?http://moneytothemasses.com/8020-articles/bonds-funds-good-source-income-ones http://moneytothemasses.com/8020-articles/bonds-funds-good-source-income-ones#comments Sun, 16 Nov 2014 10:53:36 +0000 http://moneytothemasses.com/?p=17592 Bond funds offer an alternative income source to equities. A bond is essentially a loan to a company and the terms of the bond, including the interest paid, are agreed at outset. As such, investors are exposed to credit risk i.e. that the bond issuer goes bust. However, corporate bond funds will typically invest in...

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income bond fundsBond funds offer an alternative income source to equities. A bond is essentially a loan to a company and the terms of the bond, including the interest paid, are agreed at outset. As such, investors are exposed to credit risk i.e. that the bond issuer goes bust. However, corporate bond funds will typically invest in 100-200 different bond issues to diversify risk and not over-expose investors to the fortunes of one company.

What level of income can you expect?

One way of expressing the level of income payments investors are likely to get from a bond fund is to look at the current yield, which gives the current income as a percentage of the price you pay for the investment. The average current yields on bond funds by type (according to the Investment Management Association’s categorisation) are given below:

IMA bond sectorYield
Sterling High Yield5.79
Sterling Strategic Bond3.89
Sterling Corporate Bond3.56
Global Bonds2.19

 

The current yield for individual funds ranges from 3% (on the lower risk investment grade bond funds) to 5% (on high yield bonds). But while yields may appear attractive investors must remember that higher yields mean higher investment risk without exception. At the foot of this article I’ve produced a warts and all analysis of the current yields of all the bonds funds open to DIY investors. To put these figures into context the average UK Equity Income funds yields 4.05%.

Why global bonds yields are so low?

To emphasise how risk influences current yield just look at the highest yielding global bond funds, they hold European bonds from Governments and corporates. The the lower yielding funds have a skew towards the US where yields on debt issued by the Government have fallen. That’s why the average global bond fund only offers a yield of around 2.19% as bond fund managers are worried about the downside risks associated with investing in bonds and are opting for safer bets, principally in the US where investor money flows to times of crisis.

In terms of UK bonds, the risk scale goes from the safer Sterling Corporate Bond funds, through the Strategic Bond funds ending up at the High Yield funds.

Bonds are an unreliable income source

Current yield is only part of the story. What is far more important is the consistency of the payments investors actually receive. There’s no good buying a fund with a decent yield if it has a habit of cutting payments. Most bond funds do not tend to prioritise income and bonds certainly don’t provide a source of growing income, with income fixed. That means over time inflation will eat away at the real value of any income produced. If you are seeking a reliable and growing income stream then you need to invest in Equity Income funds.

Bond fund dangers

While bond funds have performed strongly in 2014 this has come off the back of a terrible 2013 for bond investors. Those tempted to invest in bond funds should be mindful that we are approaching the end of a 30 year bull market for bonds. That means that there is a real chance of loss of capital when the market inevitably turns. Bonds can be used to diversify your source of income but equity income remains the best choice for those trying to fund a long retirement.

Bond funds to buy for income

Those tempted by bond funds as a source of income, in particular high yielding funds, should look for defensively positioned funds. Kames High Yield Bond fund is more defensively positioned that its peers yet still provides a respectable 4.22% yield.

Those investors happy to leave the strategic allocation of bonds (i.e. gilts vs high yield vs investment grade corporate bonds) to a bond manager should look at a fund such as Artemis Strategic Bond – a soberly run strategic bond fund which has demonstrated an ability to preserve capital. The manager (James Foster) made some astute allocation calls in 2013 around the decision of the US to taper its money printing programme, helping the fund to be one of the top performers within its sector over the last year. The fund has a current yield of 4.2%.

And those investors tempted by dabbling with individual retail bond issues should remember that these are not covered by the FSCS (Financial Services Compensation Scheme) – so steer clear.

Bond fund current yields

Fund NameUnit trust sectorYield
Old Mutual – Bond 3Global Bonds8.18
SJP – International Corporate BondGlobal Bonds6.72
Legg Mason – Global Multi Strategy BondGlobal Bonds5
M&G – European High Yield BondGlobal Bonds4.82
Threadneedle – European High Yield BondGlobal Bonds4.8
BlackRock Invest Mgrs UK Ltd – Charinco Common InvestGlobal Bonds4.15
Close – Select Fixed IncomeGlobal Bonds3.98
Old Mutual – Global Strategic BondGlobal Bonds3.81
Templeton – Global Total Return BondGlobal Bonds3.7
Marlborough – Global BondGlobal Bonds3.59
Natwest – Global Investment Grade BondGlobal Bonds3.21
SWIP – European Corporate BondGlobal Bonds2.9
EFA – New Horizon Enhanced IncomeGlobal Bonds2.83
FP – CAF Fixed InterestGlobal Bonds2.8
CF Canlife – Global BondGlobal Bonds2.57
BlackRock – Overseas Corporate Bond TrackerGlobal Bonds2.34
FP – FP Octopus Fixed IncomeGlobal Bonds2.28
GLG – Global Corporate BondGlobal Bonds2.21
M&G – European Corporate BondGlobal Bonds2.06
Threadneedle – Dollar BondGlobal Bonds1.9
Threadneedle – Global BondGlobal Bonds1.9
Threadneedle – European BondGlobal Bonds1.8
PFS – PanDEFENSIVEGlobal Bonds1.7
Investec – Global BondGlobal Bonds1.7
EFA – New Horizon High IncomeGlobal Bonds1.57
F&C – Global BondGlobal Bonds1.34
BlackRock – Global BondGlobal Bonds1.32
Scot Wid – Cautious PortfolioGlobal Bonds1.3
L&G – Global Inflation Linked Bond IndexGlobal Bonds1.2
Invesco Perpetual – Global BondGlobal Bonds1.19
Baring – Global BondGlobal Bonds1.1
BlackRock – Overseas Government Bond TrackerGlobal Bonds1.06
Threadneedle – European Corporate BondGlobal Bonds1
Newton – International BondGlobal Bonds0.92
M&G – Global Government BondGlobal Bonds0.9
Henderson Inst – Overseas BondGlobal Bonds0.8
JPM – Global Ex UK BondGlobal Bonds0.78
Baillie Gifford – Global BondGlobal Bonds0.7
M&G – European Inflation Link Corp BondGlobal Bonds0.62
TM – UBS Global Fixed IncomeGlobal Bonds0.6
M&G – Global Macro BondGlobal Bonds0.43
SWIP – Global Bond PlusGlobal Bonds0.4
Standard Life Investments – Global Index Linked BondGlobal Bonds0.31
Scot Wid – International BondGlobal Bonds0.1
City Financial – Defensive Global BondGlobal Bonds0.02
JPM – IncomeSterling Strategic Bond6.79
L&G – Dynamic BondSterling Strategic Bond6
Henderson – Fixed Interest Monthly IncomeSterling Strategic Bond6
Henderson – Preference & BondSterling Strategic Bond5.7
Artemis – High IncomeSterling Strategic Bond5.6
SJP – Corporate BondSterling Strategic Bond5.59
Old Mutual – Bond 1Sterling Strategic Bond5.56
Old Mutual – Monthly Income BondSterling Strategic Bond5.5
Henderson – Strategic BondSterling Strategic Bond5.4
Legg Mason – Income OptimiserSterling Strategic Bond5.4
Schroder – Strategic BondSterling Strategic Bond5.13
Franklin – Strategic BondSterling Strategic Bond4.94
PFS – TwentyFour Dynamic BondSterling Strategic Bond4.93
Ecclesiastical – Amity Sterling BondSterling Strategic Bond4.87
Schroder – Strategic CreditSterling Strategic Bond4.81
Threadneedle – Strategic BondSterling Strategic Bond4.8
Invesco Perpetual – Monthly Income PlusSterling Strategic Bond4.79
Marks & Spencer – High IncomeSterling Strategic Bond4.6
AXA – Framlington Managed IncomeSterling Strategic Bond4.52
Jupiter – Strategic BondSterling Strategic Bond4.4
Barclays – Sterling BondSterling Strategic Bond4.27
Investec – Strategic BondSterling Strategic Bond4.24
Artemis – Strategic BondSterling Strategic Bond4.2
Aberdeen – World Strategic BondSterling Strategic Bond4.2
F&C – Strategic BondSterling Strategic Bond4.1
SWIP – Strategic BondSterling Strategic Bond4.1
City Financial – Diversified Fixed InterestSterling Strategic Bond4.09
F&C – Extra Income BondSterling Strategic Bond4
Scot Wid – Strategic IncomeSterling Strategic Bond4
Aviva Inv – Higher Income PlusSterling Strategic Bond3.97
Fidelity – Extra IncomeSterling Strategic Bond3.94
Aviva Inv – Managed High IncomeSterling Strategic Bond3.84
Baillie Gifford – Corporate BondSterling Strategic Bond3.8
Aviva Inv – Strategic BondSterling Strategic Bond3.75
Royal Bank of Scot – High YieldSterling Strategic Bond3.67
NFU Mutual – Gilt & Corporate BondSterling Strategic Bond3.65
CIS – Sustainable Managed IncomeSterling Strategic Bond3.63
GLG – Strategic BondSterling Strategic Bond3.58
JPM – Strategic BondSterling Strategic Bond3.45
Premier – Strategic High Income BondSterling Strategic Bond3.35
Allianz – Sterling Total ReturnSterling Strategic Bond3.34
Kames – Strategic BondSterling Strategic Bond3.26
Sarasin – Sterling BondSterling Strategic Bond3.25
Fidelity – Strategic BondSterling Strategic Bond3.23
Rathbone – Strategic BondSterling Strategic Bond2.9
Insight – Strategic BondSterling Strategic Bond2.81
M&G – Optimal IncomeSterling Strategic Bond2.75
Old Mutual – Voyager Strategic BondSterling Strategic Bond2.75
CF – IM BondSterling Strategic Bond2.68
Standard Life Investments – Strategic BondSterling Strategic Bond2.67
Architas MM – Strategic BondSterling Strategic Bond2.29
Schroder – Charity Fixed InterestSterling Strategic Bond2.2
Insight – Inflation Linked Corporate BondSterling Strategic Bond2.1
HL – Multi Manager Strategic BondSterling Strategic Bond2.03
Virgin – IncomeSterling Strategic Bond2
AXA – Sterling Strategic BondSterling Strategic Bond1.6
Invesco Perpetual – Tactical BondSterling Strategic Bond0.69
M&G – UK Inflation Linked Corporate BondSterling Strategic Bond0.15
Walker Crips Stockbrokers Limited – TB Walker Crips Income from Short Term LendingSterling Corporate Bond8.4
Alliance Trust – Monthly Income BondSterling Corporate Bond5.6
IWI – Fixed Income PortfolioSterling Corporate Bond5.1
M&G – CharibondSterling Corporate Bond5.1
Old Mutual – Bond 2Sterling Corporate Bond4.91
Schroder – All Maturities Corporate BondSterling Corporate Bond4.75
Rathbone – Ethical BondSterling Corporate Bond4.7
Schroder – UK Corporate BondSterling Corporate Bond4.58
Cler Med – IncomeSterling Corporate Bond4.53
Thesis – Optima BondSterling Corporate Bond4.5
Aberdeen – Sterling Corporate BondSterling Corporate Bond4.5
UBS – Corporate Bond UK PlusSterling Corporate Bond4.5
Marlborough – Bond IncomeSterling Corporate Bond4.49
L&G – Managed Monthly IncomeSterling Corporate Bond4.3
L&G – Sterling IncomeSterling Corporate Bond4.1
SWIP – Corporate Bond PlusSterling Corporate Bond4
Royal London – Corporate BondSterling Corporate Bond3.98
Royal London – Ethical BondSterling Corporate Bond3.93
FP – Brown Shipley Sterling BondSterling Corporate Bond3.9
JPM – The Bond For CharitiesSterling Corporate Bond3.84
Allianz – UK Corporate BondSterling Corporate Bond3.81
BlackRock – Corporate BondSterling Corporate Bond3.73
Insight – Corporate BondSterling Corporate Bond3.72
F&C – Corporate BondSterling Corporate Bond3.7
L&G – Fixed InterestSterling Corporate Bond3.7
CF Canlife – Corporate BondSterling Corporate Bond3.7
HSBC – Corporate BondSterling Corporate Bond3.7
Threadneedle – UK Corporate BondSterling Corporate Bond3.7
Invesco Perpetual – Corporate BondSterling Corporate Bond3.69
Aviva Inv – Monthly Income PlusSterling Corporate Bond3.65
Threadneedle III – UK Corporate BondSterling Corporate Bond3.6
CIS – Corporate Bond IncomeSterling Corporate Bond3.6
Ignis – Corporate BondSterling Corporate Bond3.52
Kames – Ethical Corporate BondSterling Corporate Bond3.52
AXA – Sterling Long Corporate BondSterling Corporate Bond3.5
Close – Bond Income PortfolioSterling Corporate Bond3.48
Alliance Trust – Sustainable Future Corporate BondSterling Corporate Bond3.48
Smith & Williamson – Fixed InterestSterling Corporate Bond3.43
Kames – Investment Grade BondSterling Corporate Bond3.42
Scot Wid – Corporate BondSterling Corporate Bond3.4
UBS – Sterling Corporate Bond IndexedSterling Corporate Bond3.4
Walker Crips Stockbrokers Limited – TB Walker Crips Corporate BondSterling Corporate Bond3.4
BlackRock – Corporate Bond TrackerSterling Corporate Bond3.37
M&G – Strategic Corporate BondSterling Corporate Bond3.37
Fidelity – Moneybuilder IncomeSterling Corporate Bond3.35
Royal Bank of Scot – Extra IncomeSterling Corporate Bond3.32
F&C – Responsible Sterling BondSterling Corporate Bond3.3
Henderson Inst – Long Dated CreditSterling Corporate Bond3.3
M&G – Corporate BondSterling Corporate Bond3.28
Standard Life Investments – Corporate BondSterling Corporate Bond3.26
Standard Life Investments – Ethical Corporate BondSterling Corporate Bond3.24
BlackRock – Corporate Bond 1 to 10 YearSterling Corporate Bond3.22
Threadneedle – UK Social BondSterling Corporate Bond3.2
Henderson – All Stocks CreditSterling Corporate Bond3.2
AXA – Sterling Corporate BondSterling Corporate Bond3.2
SJP – Investment Grade Corporate BondSterling Corporate Bond3.19
Kames – Sterling Corporate BondSterling Corporate Bond3.18
Morgan Stanley – Sterling Corporate BondSterling Corporate Bond3.16
Old Mutual – Corporate BondSterling Corporate Bond3.16
Baillie Gifford – Investment Grade BondSterling Corporate Bond3.1
L&G – Sterling Corporate Bond IndexSterling Corporate Bond3.1
Henderson – Sterling BondSterling Corporate Bond3.1
L&G – Short Dated Sterling Corporate Bond IndexSterling Corporate Bond3
Premier – Corporate Bond Monthly IncomeSterling Corporate Bond3
Aviva Inv – Corporate BondSterling Corporate Bond2.97
JPM – Sterling Corporate BondSterling Corporate Bond2.92
Jupiter – Corporate BondSterling Corporate Bond2.9
Fidelity – MoneyBuilder Income Reduced DurationSterling Corporate Bond2.85
SVS Church House – Investment Grade Fixed InterestSterling Corporate Bond2.84
Legg Mason – Global Blue Chip BondSterling Corporate Bond2.7
Aberdeen – Charity Select UK BondSterling Corporate Bond2.6
M&G – Short Dated Corporate BondSterling Corporate Bond2.17
Standard Life Investments – Short Duration CreditSterling Corporate Bond2.1
M&G – Global Corporate BondSterling Corporate Bond2.02
Standard Life Investments – AAA IncomeSterling Corporate Bond1.95
SWIP – Sterling Bond PlusSterling Corporate Bond1.7
AXA – Sterling Credit Short Duration BondSterling Corporate Bond1.5
City Financial – Credit OpportunitiesSterling High Yield17.31
JPM – Global High Yield BondSterling High Yield6.88
L&G – High IncomeSterling High Yield6.8
Newton – Global High Yield BondSterling High Yield6.51
Aberdeen – High Yield BondSterling High Yield6.5
Threadneedle – High Yield BondSterling High Yield6.3
Marlborough – High Yield Fixed InterestSterling High Yield6.05
Schroder – Monthly High IncomeSterling High Yield6
Investec – Monthly High IncomeSterling High Yield5.92
AXA – Global High IncomeSterling High Yield5.9
Scot Wid – High Income BondSterling High Yield5.8
SWIP – European High Yield BondSterling High Yield5.2
Aviva Inv – High Yield BondSterling High Yield5.01
SWIP – High Yield BondSterling High Yield5
Fidelity – Global High YieldSterling High Yield4.86
Standard Life Investments – Higher IncomeSterling High Yield4.82
M&G – Global High Yield BondSterling High Yield4.79
AXA – Pan European High Yield BondSterling High Yield4.66
Invesco Perpetual – High YieldSterling High Yield4.54
F&C – Maximum Income BondSterling High Yield4.5
Ignis – High Income BondSterling High Yield4.36
Kames – High Yield BondSterling High Yield4.22
Baillie Gifford – High Yield BondSterling High Yield4.1
M&G – Global Floating Rate High YieldSterling High Yield3

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Will there be a Santa rally this year?http://moneytothemasses.com/8020-articles/will-there-be-a-santa-rally-year http://moneytothemasses.com/8020-articles/will-there-be-a-santa-rally-year#comments Sat, 15 Nov 2014 23:06:30 +0000 http://moneytothemasses.com/?p=17573 It’s that time of year where investors start talking about whether there will be a Santa rally this year. The Santa rally is the name given to the end of year stock market rally. But like all the well known investment axioms there’s a lack of analysis or hard facts surrounding the phenomenon. For example when does it...

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santa rallyIt’s that time of year where investors start talking about whether there will be a Santa rally this year. The Santa rally is the name given to the end of year stock market rally. But like all the well known investment axioms there’s a lack of analysis or hard facts surrounding the phenomenon. For example when does it usually start?

Well that largely depends on who you ask. But typically it refers to a rally in stock prices in the month of December, or sometimes specifically the trading days between Christmas and the second trading day of January. The reasons given why it occurs range from traders closing loss making trades for tax purposes (and then reinvesting) to good all Christmas euphoria, but in truth nobody knows.

With the lack of real evidence out there I’ve analysed the last 20 years of movements in the stock market to see is there is any actual evidence of a Santa Rally.

Does the Santa Rally exist?

The Santa rally is often more talked about in the US. If you look at the stock market returns for December for the last 20 years versus the rest of the year, it certainly looks promising. The table shows the price movement in the S&P 500 for January to the end of November for each of the last 20 years, versus the price movement in December.

US santa rally

  • The first thing to notice is that in 15 out of the last 20 years there has been a Santa rally
  • Secondly, what has happened in the previous 11 months has little bearing on whether a Santa rally will occur or not.

What about in the UK stock market & can you predict a Santa Rally?

I thought I’d take the research even further and look at whether the Santa Rally phenomena exists in the UK. Also can you predict when a rally occurs?  Does what happens in the period before December make a difference at all?

The table below summarises the results for the FTSE 100 over the last 20 years:

uk santa rally

 

To sum up:

  • The stock market has risen in 19 of the last 20 years in December!
  • With an average rally of 2.07%
  • Year to date performance or the preceding 6 month market movements give no indication as to whether a santa rally will occur or not.
  • Neither do market movements in the months just before December make a difference. The only year that there wasn’t a Santa Rally was 2002, and the market had risen strongly in October and November despite the torrid year to date performance.

19 out of 20 is statistically very significant. In theory in any given month you can either make money or lose money. So the binary nature of the outcome would lead you to expect the distribution to be nearer 10 good vs 10 bad years rather than 19-1. Of course that is slightly simplistic but just look at the columns for September, October and November – the spread of good and bad years is much more in line with expectations.

So there is no specific indicator in the preceding months that you will or won’t get a Santa Rally in December, but the odds are that one will occur

Can you predict the scale of a rally?

In theory a rally is simply when you make some money. So making 0.1% would be a rally as there is no definition of what constitutes a surging market. But can you get an indication of the size of any potential rally? Well the answer is apparently so. The table below is a replica of the table above but coloured coded. Each month has been graded from green to red, with a the strongest positive stock market moves in dark green while the biggest falls are in dark red. So you can pick out unusually strong or weak months.


santa rally prediction

What becomes apparent is that the strongest santa rallies (and indeed the only fall) are preceded by strong market swings, both positive and negative. Essentially providing a springboard to a stronger December. A fairly flat Autumn usually leads to a weaker rally. So perhaps if the last week of November can boost the 2.02% figure for November it will set up a strong December rally. If not then the best we are likely to get is a small rally pushing the UK stock market near previous highs. But like all axioms, nothing is certain and maybe we are overdue a terrible December!

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