Who is Warren Buffet?

Warren Buffet is probably the most famous investor in the world and may or may not be the richest man in the world.

He lives & works not in New York, Tokyo or London but Omaha, Nebraska

His investment style is basically buy good quality, profitable companies (Coca Cola, Gillette, Wal Mart) at low prices during market turbulence.

It sounds very simple like going to the supermarket and stocking up when your favourite beer or brand of beans is on discount....but it requires a lot of discipline, nerve and a long term view.

Currently markets have dipped in the last year and will continue to be low for the foreseeable future, people are scared to invest. Markets will recover the question is when. However by the time the amateur investor hears about an upturn it will be too late.

Equity Release: What is it?

Equity Release is a way of people over 55 to release money from their property to give them more money in retirement.

There are 2 main types

1. Lifetime mortgages
   
2. Home Reversion

It is heavily regulated these days and has a trade body (SHIP)

Equity release is available through specially qualified Financial Advisers. My company AP Financial Services & I have the necessary permissions.

Bank of England "gives" banks £50 billion.

Yesterday the Bank of England announced it would give UK banks £50 billion in exchange for mortgage backed securities.

It was a move designed to put more money into the financial markets.

However it is somewhat of a u-turn for the Bank of England & its governor Mervyn King who denied it would not do anything liek this a few moths ago. The bank has basically bought assets that nobody else wanted on the financial markets.

It should be noted that the big 5 banks made profits of £30 billion in the last year despite making some rather large mistakes.

Bank of England lowers Interest Rates

The Bank of England yesterday lowered interest rates to 5%.

Will this mean lower mortgage interest rates?

Hmmm...it depends

1 Lenders had priced in the likely decrease into new tracker/discounted mortgages. it's like when supermarkets put up drink prices in November to claim a massive drop just before Christmas
2 Some organisations are not passing on the full 0.25% drop, with Nationwide you may only get a 0.12% drop.
3 Other banks are "reviewing rates within the next 2 weeks"

100% Mortgages Withdrawn

Abbey became the final large lender to withdraw 100% mortgages this week.

Prior to the credit crunch, borrowers were able to borrow up to 125% of the property value. Like other riskier types of borrowings such as sub-prime mortgages, product providers have removed these loans from their books.

it will casuse probelems for 2 types of lenders

1 First time buyers who don't have a deposit.
2 Buyers who took out 100% mortgages in the good times and now won't be able to get a new remortgage deal especially those on interst only mortgages. Their mortgages are likely to increase considerably.

What happened at Bear Stearns?

Bear Stearns was the 5th largest US Investment Bank. It encountered difficulties and had to be bailed out by the US Federal reserve the equivalent to the Bank of England) and is the subject of merger at a ridiculously cheap price by rival JP Morgan.

How did all this occur?

The company had exposure to bad (sub-rime) mortgages in America. The mortgages were sold on using quite complicated financial products. Rumours began circulating that it also had problems with its prime (normal) mortgage investments.

With the rumours & a lack of action to deny them, investors began withdrawing money from Bear Stearns giving it sever cash flow problems and a spiralling crisis.

What is an Investment Bank?

Investment Banks have been widely discussed recently. Bear Stearns is one, as is Lehman Brothers. It begs the question, "what is an investment bank?"

Investment Banks don't offer services to normal retail customers like you or me nor do they have branches on the high street.

Basically they operate in 2 ways,

1. Helping companies and governments raise money by issuing and selling shares in the organisation or debt such as corporate bonds.
2. They also provide advice on mergers between companies & acquisitions

What are Sovereign Wealth Funds?

There are lots of stories circulating about Sovereign Wealth Funds. So what are they?

They are government funds from counties like the oil rich Arab countries & emerging markets like Singapore & China. The Chinese one is worth $1.46 trillion! ($1 460,000,000,000 ) The money is generated by the export of natural resources such as oil and gas in the case of the Gulf States and Russia and manufactured goods in the case of China. The Sovereign Wealth funds are buying assets to safeguard the financial future of their home countries these might include shares in large companies, government stocks or commercial property. One example in the news recently is Dubai International Capital owns budget hotel chain Travel Lodge and has been interested in acquiring Liverpool Football Club.

The funds have become increasingly important in Western financial markets, bailing out US banks hit by the credit crunch. British Banks such as Royal Bank of Scotland & Barclays have seen investment from Qatar and Singapore respectively.

An interesting issue is that will the funds demand a greater say in the running of companies perhaps based on political reason? Some of the US banks bailed out by Arab money have issued special share classes to accommodate the new money without the usual voting rights.

Revenue buys stolen information about tax haven

It has come to light, that the tax authorities (HMRC) have paid £100 000 for information about bank accounts in Liechtenstein. They aim to potentially get back £100 million in tax avoidance from UK residents who have stashed money there to avoid UK tax. They bought the disk with stolen data from a disgruntled former employee of the Liechtenstein Global Trust (LGT).

The German tax authorities previously had paid 5 million Euros for information about German tax payers. Tax inspectors there are going through the finances of 900 people based on the information they received.

Lichtenstein is a major financial centre with 75 000 registered companies but only 35 000 residents. The LGT offers “wealth management to individuals and companies with the promise of absolute confidentiality.”

HMRC have the power to pay informants for information and have been investigating offshore investment in tax havens like the Isle of Man & the Channel Islands. Whether the payments for the stolen data is legal will be a big question. Finally as Mickey Clarke of the Evening Standard noted, “hopefully they won’t lose the valuable disc!”

Spot the Dogs: Poor Investment Funds

Every year Bestinvest name & shame the worst performing (dog) investment funds ; those underperforming the benchmark in each of the last three years and down on the benchmark by 10% over the same period.

Scottish Widows were quoted as ‘gone to the dogs’, with over half the group’s funds underperforming.

The worst culprits in different categories were

• UK – £13m Marlborough UK Equity Growth, down 37%
• European – £355m Melchior European Opportunities, down 37%
• International – £60m UBS Global Optimal, down 14%
• North America – £9m Invesco Perpetual US Aggressive, down 27%
• Tech – £37m Jupiter Global Technology, down 11%
• Japan – £66m M&G Japan Smaller Companies, down 28%
• Emerging Markets – £59m Lloyd George Emerging Markets, down 19%
• Asia Pacific – £232m Invesco Perpetual Hong Kong & China, down 25%

Invesco Perpetual have star manager Neil Woodford but as you can see are home to 2 dogs.

Share picking, potentially dangerous for your wealth.

One area the Sunday newspapers love is share picking, it is also beloved of sites like the Motley Fool.

The problems include:

• Newspaper journalists are not investment professionals. There is no comeback on their “advice”
• They don’t consider attitude to risk or things like the need for emergency funds.
• Do you have the investment knowledge? Is the share a cheap because they company is a basket case or merely unfashionable? Can you predict Northern Rock style crises?

The solution

Invest in a good mutual fund, you eliminate a lot of the risk. A professional manager looks after your money and can taken action on your behalf in the event of a Northern Rock style crisis or take advantage of low market prices

Which ones? Speak to your financial adviser, discuss your needs, risk and how much you can realistically invest.

Northern Rock Nationalised

After 5 months, the government has finally taken action over Northern Rock. It will be nationalised after £51 billion has already committed to the ailing bank in loans & guarantees to savers.

Nationalisation become inevitable after the one potential bidder after another was rejected.

When the crisis arose, there were a number of alternatives

1 Let the bank go bust.

2 Let a high street bank like Lloyds TSB take over the bank, who were initially interested.

Probably the worst aspect of the crisis was the Chancellor being indecisive for so long & seemingly hoping the problem would go away, the delays have severely damaged the Northern Rock brand.

There is one glimmer of hope, the man put in charge Ron Sandler has a good record of previously running Lloyds & Nat West.

Norwich Union...windfall....generous?

Norwich Union have not been slow in trumpeting a £3 billion distribution of money to With Profits policy holders.

Is it a good deal for the consumer?

They actually have over £5 billion left over from fund re-organisation. This is actually customers' money. They are being coy why they can't distribute the other £2 billion ot customers

90% of the money distributed is going to policy holders with 10% going to Norwich Union shareholders. They originally wanted to give a lower figure to clients but then the government's Policyholder Advocate put pressure on them.

In context, a lot of these policies are held in underperforming endowment policies for which Norwich Union have had to pay compensation for misselling.

A final note, they aren't paying out the customers' money to customers straight away. They are doing it over a 3 year period!

New Star: fallen Star?

New Star are one of well known fund providers, they advertise heavily in the money sections of the broadsheet newspapers always launching a "new, exciting opportunity". They have a distinctive psychedelic multi-coloured logo, which apparently looks that way because the printers forgot to add any black to the printing proof.

They were founded by George Duffield, who previously built up Jupiter. He has been extremely generous in sharing his wealth by giving share options to his employees.

However things have started to come unstuck int he last year as Financial advisers have moved money out of under-performing New Star funds.

When the company was established in the early noughties, they brought in many highly paid star fund managers and continue to launch new Funds.

The perception now withing the industry is that they have concentrated too much on trying to grow rather than doing the basics of investing existing investor's money wisely. Some of the funds also have a novelty feel about them.

That said, they still have some very funds. Which ones? speak to your adviser ;).

Food & Fuel Inflation

For the last 50 years, the price of food has come down due to intensive modern farming techniques.
Why then has the price of bread increased quite significantly over the last year?

Production of wheat worldwide hasn't increased much recently, what has increased is demand from India & China with a combined population of 2 billion. This has caused much of the food inflation we have seen recently.

It's a similar story with oil & gas, there is greater demand from newly industrialising countries with production remaining level as market makers put up prices as compettion is greater.

Interest Rates fall 0.25% to 5.25%

As widely predicted the Bank of England reduced interest rates by a quarter of a percent to 5.25%.

It is a bid to stimulate the economy by putting more money in people's pockets. Is this a good thing? Not if it encourages people to borrow more money, as that it partly why economic problems possibly loom.

Interestingly the reason why the Bank of England put up rates several times last year before last summer's "credit crunch" was because of fears of inflation caused by borrowing. Fuel & food inflation is still around....

Rogue Trader: Jerome Kerviel at Societe Generale

You will have read about Jerome Kervie. His deals lost French bank Societe Generale £3.71 billion, it seems he was able to counteract risk management measures due to his previous job in administration.

What made the problem worse for Societe Generale, was they sold the bad deals this week when the markets were headed downwards.

The Chief Executive has offered to resign.

How can we avoid a recession?

Interesting question posed on Radio 5 Live's "Wake up to Money" programme.

How can we personally do to avoid a recession?

1 Pay off your debts
2 Spend money to help the economy? Not if it's on a credit card!

Mortgages: Best Buy tables...the problems

Are mortgage best buy tables you see in newspapers misleading?
Possibly

The biggest problem is Lenders know how to manipulate them, the biggest snare is usually the ones at the top have large arrangement fees. Lenders use the arrangement fee as part of the cost of the deal rather than reflecting their administration costs

There are a number of problems with mortgage best buy tables. They don't contain important information such as:

1 Miss Loan to value (how much of the property value can you borrow)
2 Loan size
3 higher Lending charges
4 Applicant's salary & profession
5 Type of property
6 How long is the rate for? 6 months?
7 Is interest calculated daily or annually?

There are 12 000 mortgage products on the market, so maybe it's worth getting advice from an independent professional.

Greed & fear

Sonja Schemmann of Schroder made a very simple but highly truthful statement recently.

"Greed drives markets higher, fear drives them lower"

Until this summer the markets were driven by greed, the global economy was was expanding, companies were buying other companies. Investors were putting their money into new areas without understanding the risks.

Result: markets reach new highs

Then this summer, problems emerge in the US banking sector, inflation rises due to high energy & food prices occurred. Consumer & business confidence falls & the markets drop.

Neil Woodford Invesco Perpetual "UK flirting with recession"

Leading fund manger Neil Woodford believes the UK may be in recession by the end of next year. he states fears that the a downturn in the housing market may affect consumer confidence in other areas of the economy.

He runs £20 billion worth of money in various funds. In the last 5 years £1000 invested in Woodford's High Income Fund has returned £2610 compared the the FTSE 100 which would have returned £2100.

Recently he has favored utility companies, the oil sector, telecoms and a number of stock specific situations such as Tesco.

He is most famous for investing significant amounts in tobacco companies , which generate huge profits.

Virgin II FTSE 100 Tracker Fund

Lawrence Gosling positively trashed Richard Branson & virgin Money with his comments in the previous post.

Would I, a Swindon based Financial adviser recommend Virgin products to my clients?

Well let's look at one.

The Virgin FTSE 100 is an investment fund which tracks the movements of the 100 biggest UK companies. This is not so great for a number of reasons.

• The FTSE 100 still contains Northern Rock
• Performance of FTSE 100 trackers is little better than breaking even over the last 7 years
• The Annual Management charge is 1%, its cheapest competitor is 0.2%

Summary
No

Would you trust Richard Branson & Virgin with your money?

“Would you rather give your pension, to get you through retirement, to a number of Scottish financial institutions that have been around for a few hundred years and are financially secure”

“Or rather give it to a group by someone who made his name selling records and has since dabbled in gyms, trains, mobiles and more recently financial services?”

“Buying a pension or life assurance is not the same as buying a plane ticket or a CD”

"I can see no reason why anyone would want to do business with the Virgin Group for financial services. It is not offering anyhting that yo cannot get better from other financial institutions"

The views of Lawrence Gosling in this week’s Investment Week (3/12/07)

Which? slams Bank Financial Advisers, IFAs better

A report by Consumer group Which? has slammed financial advisers tied to banks & building societies. 2/3rd of advisers failed to pass its benchmarks for giving good advice

Neil Fowler, editor of Which? concluded "For more complex financial products such as investments, mortgages and pensions, you should really see an adviser. On the whole, you'll get better advice from an Independent Financial Adviser"

I will be telling everybody I meet in Swindon. :)

FSA wastes consumers money?

There have been 2 instances reported in the Financial Press of consumer watchdog the Financial Services Authority (FSA) wasting tax payers’ money.

Firstly New Model Adviser reported outgoing Chief Executive John Tiner has had 2 leaving parties costing £13 000, not bad for a man on £650 000 a year.

Secondly Money Marketing noted the FSA pays more than £13 million to external consultants.

10 Largest Investment Funds in the UK

Interesting article in Fund Strategy about investment fund size & performance. Normal logic is that if a fund becomes bigger because of populariy it becomes harder to run, it is more difficult to find invest the money in good value values which are often small in size.

The one exception has been Neil Woodford at Invesco Perpetual with his Income & High Income funds, who gas managed ot maintain his performance despite huge inflows of cash.

Woodford has nealy £15 billion in money invested in his funds. Huge, but as Chris Traulsen of Morningstar pointed out, the largest US funds exceed $100 billion.

Would I invest in any of the top 10 funds? Yes, a few...however I would avoid others.

Nationwide withdraws Payment Protection Insurance (PPI)

Nationwide has stopped selling payment protection insurance after it admitted uncovering problems in mystery shopper exercises. They are now retraining their staff, a large percentage based in Swindon.

Payment Protection Insurance covers you against missed payments due to unemployment and other reasons on credit cards

They have advised customers to contact IFAs (Independent Financial Advisers).

Earlier in the the year loans.co.uk were fined by the Financial Services Authority (FSA) for misselling.

US Sub Prime Mortgages

I've written abut the US Sub prime mortgage crisis previously and more generally about sub prime mortgages. Now as the current financial correction is being blamed on it, it is time to revisit it.

What happened?

US banks lent money when interest rates were very low to people who would maybe not normally get mortgages. Some sections of the press have dubbed them "trailer trash" hinting that the relatives of Britney Spears could cause economic meltdown.

Ok, some US banks have bad debts...how does this affect the UK & Swindon?

Banks buy debts form each other, some UK & European banks have taken on these debts. UK Bamks are being coy about how much of these problem debts they took on.

Stock markets are jumpy at the best of times, during August many dealers are away on holiday so small scale sell offs have had a larger impact.

What now?

The US federal Reserve stepped in to help US banks which calmed the fears.

What should I do?

1 Sit tight, corrections happen all the time. Banks like HBos (Halifax bank of Scotland) are sniffing aroung the US mortgage market looking to pick up bad debts and make a killing. Derive your own conclusions

2 Speak to your financial adviser, they should know more than the Sun or Daily Mail. I have one or 2 recommendations myself...

What next for interest rates?

In the last 2 years the Bank of England's Base rate has risen from 3.5% to 5.75%, with products like mortgages & loans being linked to it.

The main reason for the rise was to control inflation and partly tot try to control the housing market.

Things have taken an unexpected twist recently with the sub prime mortgage problems in the US. To deal with this the US Federal reserve (the equivalent of the Bank of England) has lowered the rate at which it lends money to banks.

What does this mean for the UK, financial advisers & their clients in Swindon?

The rise in interest rates [& the forecasedt end of the world :)] is likely to stop for the time being. Tracker /discounted mortgages could become more attractive again as arrangement fees for Fixed Rate mortgages are now rather high.

Worst product provider for Customer Service

The Worst Product provider in my experience.

By far, Scottish Provident. I sent in an insurance application in April. It has still not been underwritten. I asked to speak to managers twice, my number was taken, no phone calls received.

2 complaint letters written & still not resolved

Conclusion: Atrocious

Stock Market Crisis? No, a correction.

Stock markets have been very volatile in recent weeks. In August many traders are on holiday and relatively small changes can cause huge swings in prices. The jargon used in such a situation is "a correction", typically there might be 2 or 3 corrections in any year.

In the long term markets should recover. The BBC noted yesterday that the FTSE 100 had merely returned to the values of October 2006.

Over the last 5 years markets have been relatively un-volatile historically.

There is an upside to the current volatility, now is a good time to buy. It is also a good time for clients with regular savings plans as their regular £50/100 buys more units.

14 000 homes repossessed in last 3 months

Repossessions have risen by 30% since last year according to the Council Of Mortgage lenders (CML). 14 000 alone in the last 3 months

Additionally 125 000 borrowers have mortgage arrears.

Things can only get worse as around 1.5 million borrowers will experience a 2% rise in interest rates in the next 6 months when their fixed interest deals end.

Who are Anthony Bolton & Fidelity Special Situations?

Anthony Bolton is one of the most famous fund managers in the UK. He's been in charge of the Fidelity Special Situations Fund since 1979. He has fantastic performance figures of 19.9% a year on average. His strategy is to find unloved out of favour shares in smaller companies

The fund has been in the news because Bolton is retiring at the end of the year. His replacement Sanjeev Shah is gradually taking over the reins.

The key question is...can Shah continue the track record of the fund?

1 At £3 billion the fund is huge, so finding bargain stocks & using the money becomes increasinlgy hard.

2 he has had mixed records in the 2 funds he has manged, one beating the market the other tracking it.

3 Fidelity's fund record has been a bit patchy recently & 3 fund managers recently left to set up their own investment boutique (small fund house).

Conclusion
There are plenty of decent alternatives to the fund with established fund managers. Have a word with your financial adviser.

See also Christpher Traulsen's article at Morningstar

Diary of Swindon Financial Adviser

What does a financial adviser do during the course of a day?
Well...today...

9am-1pm
Presentations & meetings with product providers and other financial advisers in Wootton Bassett (near Swindon).
Some are interesting, others...less so (meetings & financial advisers)

1-2pm
Lunch

2pm-5pm
Chase up tardy mortgage lenders & insurance companies. The culprits? Royal Bank of Scotland & Norwich Union.
Sort out details of client's pension & annuity
Reply to client emails.
Speak to the lovely L2, mortgage guru in Leicester.

7pm meet a client to discuss pensions in North Swindon

8pm plus: possibly catch a bit of Chelsea vs Man Utd

HSBC the World's Bank? Not in Swindon

HSBC made a profit of £11 000 000 000 (11 billion) last year.
Does this mean HSBC aren't offering customers competitive rates?
I can't comment.

Ex HSBC customers are probably the biggest source of my remortgages.
The World's Bank? Not in Swindon.

Abbey, HSBC: No arrangement fees....Misleading & Nothing New

Both Abbey & HSBC are advertising mortgages with no arrangement fee. All lenders offer such a deal, it's called the Standard Variable Rate.

When remortgaging, it's normal to look for a deal with no arrangement, legal or valuation fees. In fact I've just done one for a client today.

Interested? Give me call on Tel :01793 524806.

Why become a Financial Adviser...in Swindon?

Financial Adviser? (IFA)

I had a long term interest in saving & earning money for myself and friends.
Correct use of financial products means you can increase your standard of living without changing jobs. It's something I've always enjoyed and it's great job. Whether it's finding propel a cheaper mortgage than their bank or finding good investments for clients, it gives you a good feeling. Being a financial adviser gives me the opportunity to do this.

Why Swindon?

I live here, it has it's plusses & minuses. I am fortunate to know a few good people

What is a Sub Prime Mortgage? Exist in Swindon?

During the stock market correction in February, there was much talk of sub prime mortgages in the US.

It raises the question...what is a sub prime mortgage?
Do they exist in places like Swindon?...Yes

It is a mortgage for somebody who can't get a mortgage in the normal ways
The person could

1 be self employed & doesn't have a long term track record
2 have had some debt problems (IVAs, bankruptcies).

The rates & arrangement fees are higher as the lender is taking a bigger risk and more people default (don't pay the money back).

Spanish Property...in Crisis

Over the last week, there has been a tremendous loss in confidence in Spanish property market. One leading property firm Astroc lost 60% of its share value. .

In January the Organisation for Economic Cooperation & Development warned Spanish house prices were overvalued by up to 30%. Since 1999 prices have risen by 15% a year.

These prices have encouraged over investment and consequently over supply.

One widely held belief in recent years, was when the Euro was introduced in 2002, may criminal organisation invested illicit cash into Spanish property before the pesata became defunct.

What does it mean?
Prices will stabilize, possibly falling until market values reach more reasonable values.

Financial Advisers slam "cheap" mortgages from Abbey

Financial Advisers have slammed cheap "stepped" mortgages. Abbey recently introduced a product where rates start at 2.99%, then shoot up to 6.2% then 6.35% over 5 years.

There is also a £799 arrangement fee.
People might be able to afford the payment in year 1 but the the huge increases mean first time buyers face a huge payment shock. You're locked into using the product for 5 years, if you try to get out, you will face a redemption penalty

Avoid

Consumers don't trust Big Banks..especially Barclays.

Interesting article in Money Marketing. A survey of nearly 4000 consumers revealed 2/3rds of Barclays, HSBC, Halifax/Bank of Scotland, Lloyds TSB and Royal Bank of Scotland/NatWest customers do not trust them to sell the right products.

1 in 8 Customers claimed to have been missold a financial product.
1 in 5 Barclays customers said that money had gone astray from their accounts.

The survey was conducted by Motley Fool.

Mortgage Advisers in Swindon

Like any town, in Swindon you have a choice of people who can help you buy your Home.

Independent Financial Advisers (IFA): Whole of Market advice on mortgages & insurance, think of them as Mortgage Advisers offering a greater range of services.

Estate Agents: Typically a panel of 10-15 lenders. Not whole of Market Insurance, tied to one company. Sold to you by a youth with gelled hair & a large knot in his tie.

Mortgage Broker: Check if independent, whole of market. Offers insurance from one insurer or limited range

Banks/Building Society: only offer their own limited range of products for mortgages and insurance.

Hope the differences betweeen various kinds of mortgage advisers is clearer.

Financial Advisers in Swindon II

Before setting up in business 2 years ago, I decided to do some market research and look at the quality of financial advice available on the High Street in Swindon.

I looked at 2 of the biggest financial institutions: Halifax & Nationwide.

In the Halifax, the adviser wasn't expecting me. He advised me to have a look at Halifax's Unit Trusts & Life funds on their website and to choose the funds myself!

In the Nationwide, I quizzed the adviser and was told he much preferred doing mortgages. He added his own money was invested in a Tracker fund which had lost significant amounts of money!

Conclusion on the Financial Advice at the Halifax & Nationwide in Swindon: Steer clear.

Financial Advisers in Swindon: A survey

Recently a client approached me for financial advice. The client is moving abroad & wants to take an income from their capital.

They approached their bank and another Independent Financial Adviser (IFA). The advice they got was rather worrying. My client wouldn't be regarded as tax payer in the UK, however strangely neither the bank or IFA picked up on this.

I recommended to the client using his ISA allowance and investing in Unit Trusts/OEICs. The client wouldn't need to pay income or capital gains tax on gains.

The Bank and other IFA suggested the client invest in Investment Bonds. You pay 20% tax on any gains immediately at source...also interestingly a high commission is generated.

Conclusion: Hmmm

PS Investment Bonds can be extremely useful for Higher Rate Tax payers. Basic tax payers..no.

Interest Rate Rise likely to control Inflation

An increase in interest rates is increasingly likely after inflation figures rose to 3.1%.

Philip Shaw, chief economist at Investec Securities, said: "Today's figures mean that a May hike is now even more of a cast-iron certainty than previously. Our forecast that rates will peak at 5.5% is under review."

Richard Woolnough of M&G expects a rise in May & one in the autumn & winter to bring rates up to 5.75%.

Conclusion: If you are buying a house or remortgaging, opt for a fixed rate option.

Buy to Let: a Goldmine?

For many years private investors have had Buy to Let Properties in their portfolios. However there are some drawbacks. You are liable to income tax on the income & capital gains tax on the profits.

Factor in maintenance & insuring the property and the returns decrease further.

Rising interest rates have eroded profits too, plus the fact you can only get an interest only mortgage because of rental incomes is a further hindrance.

If you're looking for a property based investment, try a Commercial Property Fund.....to be continued

Best fund for your ISAs?: Part II Cautious Managed

In the 1990s, the bog standard fund for Investments was the With Profits fund. However they have died a death a combination of poor performance & mysterious charhes called Market value reductions.

What has replaced With profits?

One of the options is the Cautious Managed Fund.
It invests in Gilts (loans to the government), corporate bonds (loans to companies) and shares.
The fund manager has the ability to switch between these types of assets as market conditions change.

Who has the best funds?

You know the answer...take proper advice.

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.

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.

Free Financial Planning & Money Workshop

Every Thursday, I’ll be offering a free Financial Planning & Money Workshop every Thursday 7-8 pm.

It takes place at Lawn Community Centre in Swindon.
Starts on Thursday 19 October.

Map Link to Lawn Community Centre

Tags: free, workshop, money, financial planning, financial, advisers, swindon, ifa, uk

Northern Rock Mortgages: Hidden costs

Northern Rock have been advertising a Fixed Rate Remortgage at 4.49% for 2 years.

Sounds not bad….but look at the small print. “There’s a product fee of 1.5% of the loan payable for setting up this mortgage. Other fees will also apply” .

This means on a mortgage of £150 000, you pay £2 250. There is also a booking fee of £75.

Plus they don’t pay your legal or valuation Fees. Any good remortgage deal will do this

Conclusion: Avoid

Tags: Northern Rock, mortgages, rip off, financial, advisers, swindon, ifa, uk

Related: Mortgages Home Page

Free DVD Rental

Want to rent some DVDs for free? Most of the big DVD rental companies operating by post are operating free trials.

You can get up to a month free….but remember to cancel before the end of the period…otherwise you’ll start paying.

There is a list at
http://www.uk-dvd-rental-guide.com/dvd_rental_chart.htm

Note that many of the sites are powered by Screen Select or Love Film….you’ll only get one free rental period if you sign up to any companies.

Tags: dvd rental, free, financial, advisers, swindon, ifa, uk

Cheaper Train Tickets

It’s well known that train fares are over priced.
However you can reduce prices by buying 2 more tickets.
If poosible split up your journey into a series of cheap day returns.

For example the normal return fare to London from Swindon is £37!
With 2 tickets, cost is £23.50

I bought a cheap day return Swindon to Didcot £6.90
Then a cheap day return Didcot to London £16.60

You can purchase your tickets online at
http://www.nationalrail.co.uk/

Also look out for bargain single tickets eg Swindon to Didcot £2.50

Tags: train, fares, tickets, cheaper

BBC Radio Swindon Travel Money

Going on holiday can be expensive, however here are some tips to make your money go furrther abroad.

Cash vs Credit cards vs Traveller’s Cheques

Traveller’s cheques are safe & secure but the exchange rateis poor compared to the other two

Cash

In the UK, most places now offer to buy back your unused notes.

Two places which offer competive rates are the Post office and Marks & Spencer. You can order currency at sub Post offices & the money will be there the next day

Credit Cards

In theory credit cards, should offer the best deal however only really with a couple of cards

The best card to use is probably Nationwide’s. There is no charge for using it abroad. Most cards will charge you 2.75% of the amount .

Saga for the over 50s offers a % charge in Europe but 1% outside Europe

If you withdraw it cash using a credit card, standard charges are 2% with a minimum of £2.

Note: if you have a Nationwide Flexaccount Debit card, there are no charges for purchases or for making cash withdrawls.

Tags: travel, holiday, money, ifa, financial advisers, swindon, uk

BBC Radio Swindon II: Travel Insurance

Why do I need it?

What hapens if you lose your baggage or need medical treatment....

Golden Rule
don’t get it from your travel operator!

Usually 2 choices single trip insurance or annual insurance
Annual starts to become the best buy when you make more than 2 trips a year.

Costs can vary according also to where you are going eg more in the USA because of expensive medical bills.

Who offer the best deals?

Go to a broker/price comparison site eg http://www.moneysupermarket.com/travelinsurance/?Source=MS

European health Insurance Card (EHIC)

Replaces E111, get free or discounted medical treatment in any EU country + Switzerland
Get from Post Offices, Tel: 0845 606 2030 or Department of Health Website

Tags: travel insurance, european health insurance card, ehic, ifa, financial advisers, swindon, uk

Beware of Free Gifts!

Many financial organisations are offering refer a friend scheme to get new customers. Typically this involves a £20 from Marks & Spencer.

However products are not always very competitive

Eg Priveledge Insurance offer vaious inducements such as the chance to win a butler for the day, a pair tickets for Premiership or Scottish Premier League match or £500 to spend with a personal shopper.

The Telegraph quotes the folowing example

• Cover for a 56-year-old female driver with five years' no
• claims bonus
• Living in south east London.
• Driving a Ford Ka

Budget insurance are £50 cheaper, with a premium of £157.50
Privilege's £206.85.
With 12 Insurers offering lower rates than Priveledge

Tags: insurance, incentives, ifa, financial advisers, swindon, uk
Related: Insurance Home Page