Thursday, February 15, 2007

Best fund for your ISAs?: Part I Equity Income

Equity income funds usually to invest in larger more stable companies which have usually stopped growing quickly. These companies tend to be large and established, which in itself is a benefit eg BP, Vodafone, the big banks

They pay dividends to their shareholders as a means of creating loyalty; why sell your shares if they provide you with a steady income?

Which funds are best?
There are 83 UK Equity Income.
The best fund grew by 18.47% in 2006, the worst 0.1%
Over 10 years 257.59%, the worst 0.64%.

Take independent advice & don’t rely on hearsay.

Tuesday, February 13, 2007

Offset Buy to Let Mortgages

What are they?
They are Buy to Let Mortgages, where you rent the house to a tenant to pay the mortgage.

What about offsetting?
You trade (offset) your savings against the amount remaining on your mortgage (the mortgage balance)
eg £20 000 of savings offestagainst a mortgage balance of £100 000
You only pay interest on £80 000.

Usually lending rates are higher than savings rates, so you save money This works especially well for higher rate tax payers, who will pay more 40% tax on savings.

Early repayment charges are uncommon on offset mortgages…useful if better products become available & you can make unlimited overpayments.

For sole traders & partnerships the Yorkshire Bank also allows to offset business balances against residential mortgages.

The one disadvantage of offset mortgages has been higher rates than traditional repayment mortgages, however as offset mortgages have become more popular, the differential has grown smaller.

5 Common Investment Mistakes

1 Buying what you don’t understand.
What is a BRIC fund?

2 Focusing on Short Term performance.

3 Getting sucked into panic buying or selling.
Markets go & up down over time
Companies go in & out of favour

4 Believing the financial press
Financial Journalists have no obligations to Investors.
Financial advisers do have obligations.

5 Not diversifying your portfolio
All your eggs in one basket.

Based on article in “UK Investment Guide” David Berger.