Top tips for getting the most out of your money online
There is no question that money is going digital, with the pandemic speeding the switch away from cash. But how can you make your money go further in a digital world? Here are some ideas to help you stay safe and get the most out of your money online.
Internet usage has surged during the pandemic, from online food shopping to banking and much more. Among older age groups in particular, Age UK has found many who may not have used online services before are now doing so, with one in four (24%) pensioners using the internet more in 2020 than the year before. But like all things, there are pros and cons, especially when it comes to handling your finances online. While using the internet can be very easy and efficient, it also opens up risks to things like scammers and making inadvertent mistakes. Luckily, there are some steps we can all take to stay safe online, and to get the most out of the internet for our hard-earned money.
Take advantage of online tools
When it comes to taking out financial products such as loans or credit cards, the internet is your friend. Gone are the days of nervy conversations with credit card companies and accidental marks on your credit file. Instead, there is now a plethora of online tools that perform so-called ‘soft checks’ that will help you understand whether you are eligible for certain products based on your credit history. There are several to choose from, but in particular we like MoneySavingExpert’s as it is a trustworthy financial brand.
Keep an eye on your credit history
Speaking of credit histories, keeping yours in check is also vital. It is no secret that often, the big credit checking firms like Experian and Equifax make mistakes on individual’s’ credit files. It could be that your address is listed slightly wrong, or information such as the electoral register is missing. Unfortunately, this can have a significant impact on your credit history. Therefore, it is important to keep an eye on it – while some services charge for you to see your history on a regular basis, others, such as ClearScore or CreditKarma, give you free monthly access to your report.
Use comparison sites
Price comparison sites sometimes have a mixed reputation but for the most part they are extremely useful ways to hunt down the best deals online. From mobile phone contracts to insurance, you can find the cheapest deals possible on these websites. The trick is to not necessarily buy the very cheapest product on offer though. The cheapest deals will often come with caveats, but if you read the small print and weigh up the benefits of new policies, comparison sites can make shopping around very efficient. We’d recommend looking on the comparison site, then comparing directly with the providers that get listed – sometimes even better deals can emerge, and then you have a comparative price to think about too. Good comparison sites we like include Moneysupermarket, uSwitch and GoCompare.
If in doubt, step away
Financial scams are a big problem with the internet these days. All it takes is for you to click the wrong link or reply to the wrong email and the losses could be devastating. Therefore, the safest way to navigate the internet can be to step away from the offer or deal you’ve just seen and then try the old-fashioned way by calling up a provider if you want to know more. If you’re contacted by someone who seems to be from a reputable company out of the blue, tell them you’d rather discuss what they want to speak about at a different time. If you are the one making contact rather than them, you can make sure you are in control of the conversation. The message more broadly is to always have your guard up. The internet has given us all access to an array of options and choice has never been greater, but unscrupulous people are a fact of life.
Inflation is back – should you be worried?
Inflation has been off the agenda for investors for years, but prices are rising again – and it could have implications for your finances.
Inflation has been low by historical standards for much of the past decade, with price growth falling particularly sharply over the past three years. Never the easiest factor to track when it comes to your finances – a situation not helped by the amount of measures for inflation which exist – inflation has nonetheless been muted for the past few years. Using the Government’s preferred method of calculating inflation – known as CPIH – we can see that inflation has been below its official target of 2% since July 2019.
What is CPIH
CPIH stands for The Consumer Prices Index including Owner Occupiers’ Housing and covers the cost of a list of everyday items consumers buy or use, including housing costs. Between July 2019, when it stood at 2%, CPIH has plunged as low as 0.5% in the depths of the pandemic last August, before recovering as the economy unlocked. It currently stands at 1% as of March, with the reading for April due out later this month. Clearly this is some way off the Bank of England’s own target of 2%, but the important thing to remember with inflation is the trajectory, not the absolute number. This was alluded to at the latest Bank of England meeting when Andrew Bailey, the governor of the Bank and head of the committee which monitors inflation, said inflation could be “a bit bumpy this year.”
Indeed, the central projection from the Bank is that, as the vaccine programme continues and the economy unlocks more, it should mean the CPIH figure jumps above 2% towards the end of this year. There is also the ever-present risk that it goes higher than forecast, with factors such as rising commodity prices and demand for goods and services also having the potential to exceed forecasts and push up the overall inflation number.
Should you worry about rising inflation?
Inflation is bad for some of your investments, in particular cash. The value of cash is eroded over time by inflation, so a pound today buys you substantially less than it did 20 years ago, for example. For investors sitting on large amounts of cash, rising inflation is problematic at this point in time because interest rates – and therefore the interest the bank pays you for leaving your money in cash – are at record lows. The Bank of England was forced to cut rates to 0.1% in the UK last year in response to the pandemic, and it has yet to raise them from this level. With inflation currently at 1%, it means the value of any cash you may have in the bank is being eroded every year, unless it is in a bank account paying more than 1%.
For investments too, rising inflation has implications. Some investments, like commodities such as oil, can protect portfolios from rising inflation, as they often rise in tandem. Investments such as bonds, on the other hand, suffer because they pay holders a fixed amount of interest every year, and if inflation rises it can often leave these bonds paying an income that is below the inflation rate.
What can you do about it?
As with all investments, including cash, investors should regularly review their holdings. If inflation is rising, there are a number of options to counter its damaging effects on your wealth, including investing in equities, commodities, and some inflation-linked investments which track the inflation rate.
However, as always, if you have any concerns or queries the best course of action is to get in touch with your adviser.
The World In A Week - High and Dry?
It was a busy week that saw the US Federal Reserve meet to discuss monetary policy. The expectation was for a steady hand on the tiller, and they did not disappoint. Monetary policy is to remain static, with interest rates at historically low levels and the quantitative easing programme at historically high levels.
It was stressed by Chair Jerome Powell that this was not the time to be talking about scaling back bond buying. However, there was an upgrade to the outlook for the US economy. Continued progress on vaccinations, improving indicators of economic activity, and a strengthening in employment, all led the Federal Reserve to update their rhetoric. Single words matter and in March they expressed pandemic risks as “considerable”, and this word was removed in their recent commentary.
To underline the outlook for the US, the country’s official economic data was released showing an annualised growth rate of 6.4% for the first three months of 2021. Growth data typically takes a month to be collated and calculated, so it is always busy the month after the end of the quarter. The continuing level of stimulus and easing of lockdown restrictions have given a boost to the recovery. Despite the speedy upturn, President Joe Biden continues to put pressure on Congress to approve his expanding agenda.
Having now passed 100 days as President, the volume of stimulus that he wants to approve continues to rise. In March, the $1.9 trillion American Rescue Act was passed, now we have the $2.3 trillion American Jobs Plan, which has been designed to upgrade the US’s failing infrastructure, and the $1.8 trillion American Families Plan, which looks to improve workers’ benefits.
The obvious risk, with such stimulative monetary and fiscal policies in place, is that the US economy could overheat. This does increase the likelihood of a spike to inflation levels, albeit short-lived, and would demand an appropriate policy response. This is something we are keeping a close eye on.
On the other side of the Atlantic, the Eurozone slid into a double-dip recession. The output in the first three months of 2021 dropped, as the weight of continued lockdown measures and a stuttering vaccine programme left them lagging behind other developed economies. The -0.6% fall for the first quarter followed a -0.7% drop for the last quarter of 2020 creating a technical recession for the Eurozone. This backdrop demonstrates why we are currently underweight in European equities.
In the UK, consumers are embracing the reduced lockdown measures, particularly at pubs, which has seen craft and premium beers being added to the growing list of items that are hitting supply constraints. Do not underestimate the power of pent-up demand, supported by substantial savings, that we have witnessed during this lockdown.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 4th May 2021.
© 2021 Beaufort Investment. All rights reserved.
The World In A Week - Biden’s Decisive Decade
It was a volatile week for equities, but one which pretty much came out flat for the overall MSCI Global Equity Index, though the UK equity market, FTSE All Share, pulled back -0.98%. On Friday US markets bounced back, after sliding on Thursday, on a report that Biden was looking to raise Capital Gains Tax. Stocks whipsawed this week with rising coronavirus cases, mixed economic data and corporate earnings.
The week ended with US President Joe Biden’s climate change summit. The event, meant to demonstrate America’s return to the stage as a climate leader, garnered only modest pledges from attendees despite Biden’s promise of a monumental 50% cut in US emissions, declaring “this is the decisive decade” for tackling climate change. The important point appears to be everyone pulling together. Biden’s administration is focused on commitments from banks and private businesses to help fight the accelerating climate crisis. Four of the biggest US banks on Wall Street – Morgan Stanley, Bank of America, JP Morgan & Citigroup, have pledged $6 trillion in sustainable finance. The billions of dollars they will save in taxes is probably one of the reasons for such grand generosity.
In the developed world the infection rate from the pandemic continues to fall steadily, as the vaccine continues to be rolled out. Johnson & Johnson’s vaccine was finally put back into action in the US. However, in India, the pandemic continues to spiral out of control. On Friday, the nation reported 332,730 new infections, yet another global record. Hospitals are overwhelmed and turning patients away, with the country turning to mass cremations for the thousands dying each day. Incredibly tragic news and one that says we are not out of the woods yet.
Last week also proved a volatile week for Bitcoin, its worst week in months. The notoriously volatile cryptocurrency hit a high of $64,870 on 14th April, but a fresh bout of selling on Friday drove it down nearly -8% to $47,525. It keeps getting worse for the $35 billion Grayscale Bitcoin Trust, which is trading at a significant discount to the value of the underlying digital assets it owns. It has lost nearly a fifth of Its value since last Friday, and Wall Street analysts are warning of further pain to follow. An area of the market with lots of focus and hype, but an area we have left well alone.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 26th April 2021.
© 2021 Beaufort Investment. All rights reserved.
The World In A Week - The Beer Garden Boom
Global markets continued chugging along last week, with the MSCI All Country Index of global stocks returning +0.8% in GBP. A notable leader was the UK Equity market, which returned +1.5% as measured by the FTSE All Share Index. We continue to believe that the UK market could have significant room to run, having been neglected by global investors for many years. The re-opening of the UK economy continues apace, as borne out in Google’s mobility data. The less scientific measure of how difficult it is to book a pub garden right now, also supports this hypothesis.
Another interesting dataset we have observed is the excess savings accumulated by households during the pandemic. UK households are second only to the US in foregone consumption, at an estimated 10% of GDP. This compares to 6% for the world as a whole, 6.2% in Germany and 5.5% in France. As these savings are spent in the coming months, we expect this to give significant support to domestically-focused UK stocks. This also supports our view that Sterling Fixed Income remains unattractive, as a revival in economic growth is likely to lead to higher interest rates which are a negative for bonds.
Other global markets are a very mixed bag in terms of how attractive or unattractive they are to us right now. We have written many times in the past that elements of the US Equity market exhibit stretched valuations and heroic growth assumptions, although we have recently been adding small-cap value exposure which should benefit from the strong rebound in the world’s largest economy. Certain Fixed Income markets are also once again looking as if they are “priced for perfection” with the extra compensation paid to investors for holding investment grade and high yield corporate debt now roughly back to all-time lows. We think selectivity and remaining active in Fixed Income markets will be critical to client outcomes from this point.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of Monday, 19th April 2021.
© 2021 Beaufort Investment. All rights reserved.
Should you invest in an IPO? Lessons from the Deliveroo stock market launch
Should you invest in companies through IPOs? Deliveroo’s recent stock market flop is a perfect example why it may be best to steer clear.
The market for Initial Public Offerings (IPOs) has been strong in recent times, with particularly well-known company names entering the fray. But is it worth ‘getting in at the ground floor’ of a company’s stock market listing?
As the most recent high-profile example, Deliveroo’s IPO can be a valuable lesson for investors. Its IPO took place on 31 March and quickly went down as one of the ‘worst’ IPOs in stock market history – with the share price losing over 30% from its initial starting point of £3.90 per share.
Deliveroo’s stock market launch got off to a shaky start with a price that many investors seemed unwilling to pay. This is why the price kept lowering before it even launched on the market – not a good sign.
It also came under pressure from a chorus of fund managers who declared their unwillingness to participate in the IPO – citing concerns about how it treats its workers, the fact it’s unprofitable and questioning the sustainability of its business model.
The saga has quickly become the posterchild of failed IPOs in recent times – but is far from the only example of a failed share offering launch. Other firms such as Uber – a competitor to Deliveroo in the food delivery space – have had spectacular failed launches too.
This is not to say all IPOs are failures – far from it. Recent listings such as The Hut Group have been relatively successful. Another interesting example is that of home workout equipment firm Peloton – which on its stock market debut saw its price crumble quickly.
The firm has however performed admirably since, thanks in particular to the coronavirus crisis which has led to demand from homeworkers desperate to exercise in their living rooms.
This is the essential quandary for any long-term investor considering participating in an IPO – doing so is something of a gamble. If you’re convinced of the investment case for the company then you should be willing to back it over a long-term horizon.
In the short term the price could fall significantly and lose the investor a lot of money though. Those investors without the stomach for short-term falls will sell and crystalise their losses. For every Peloton or Hut Group there are also plenty of Deliveroos or Ubers.
A such there are a few lessons from the Deliveroo IPO and others that investors should heed:
- Which IPO is right for you? Some company listings such as Deliveroo’s receive large amounts of media attention – but that doesn’t mean they are the best ones to go for.
- Are there clear signals that the IPO might have issues? Deliveroo’s IPO for instance received widespread negative attention before it even listed, with the price lowering repeatedly – a bad sign from the get-go.
- Read the detail. Companies looking to list have to offer investors a prospectus. As was the case with WeWork IPOs can unravel quickly when this document is proven to be written on shaky ground.
- Take a critical view. Deliveroo was given significant criticism of its work practices which led to fund managers declaring themselves uninterested. If someone else is trying to spin a different picture, ask why that might be.
- Wait and see. Investing right at the outset might seem exciting, but waiting for the market to make its value judgement of the share price might leave you with a cheaper entry point to ownership
If you don’t have the time to dedicate to research on a company IPO, you may want to stick to investing through a mix of funds and other diversified asset classes. Investing this way outsources the work of assessing the best investment options for a generally small fee.
Even if you own a fund that has invested in Deliveroo this will be done as one part of a larger range of company stocks that ensure you’re not overly exposed in one place. Investing for most people should focus on long-term diversified growth using a range of products that ensure successful wealth growth – with no gambles whatsoever.
If you’d like to discuss your investments or have any questions from subjects raised in this article don’t hesitate to get in touch with your financial adviser.
The World In A Week - Roaring Twenties 2.0
Last week saw Boris Johnson confirm that England would proceed to the second phase of the lifting of lockdown restrictions on 12th April, as non-essential shops, beer gardens, hairdressers and gyms would be allowed to re-open their doors. There is a general expectation that consumer spending will pick up sharply as British people have been starved of access to shops, leisure activities and pubs. According to the Office for Budget Responsibility, estimates suggest that an extra £180bn of savings will have been generated during the lockdown by June 2021. There have been significant worries that inflation will begin to pick up as consumer spending frantically increases and this could be the start of a remarkable period of consumption, which could resemble something similar to the “Roaring Twenties” frenzy. This period, starting in the 1920’s, saw accelerated consumer demand in leisure and cultural activities following years of hardship and loss from World War 1.
We are in a similar situation today, having faced travel restrictions and adhering to social distancing protocols to suppress the spread of the COVID-19 virus. There are clearly some distinct similarities between the “Roaring Twenties” and current day circumstances with significant pent-up demand expected in the travel and leisure industries. Tourism and luxury fashion are two industries that are expected to thrive as lockdowns begin to ease and vaccine rollout increases.
Looking ahead to the rest of the week, today is the start of the US corporate earnings season with the S&P 500 hitting fresh highs on Friday as markets prepare for the release of company Q1 financial results. The S&P 500 closed +3.4% last week, outperforming the global equity benchmark MSCI World Index which was up +3.1%.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of Monday, 12th April 2021.
© 2021 Beaufort Investment. All rights reserved.
Is the UK the best place to put your money over the next decade?
With the economy rebounding and the vaccine roll-out gathering pace, experts are tipping the UK as an increasingly attractive place for investors to put their cash.
The UK has been unloved by investors ever since the Brexit referendum in 2016. But sentiment towards UK shares is changing as the economy begins to emerge from the pandemic. US fund manager GMO believes the UK will be the best developed world destination for investors in the next seven years, with British ‘value’ stocks of particular interest. Value stocks are companies that trade at share price levels noticeably below their fundamental factors such as dividend levels, earnings or sales.
Why? Firstly, GMO believes UK shares are undervalued. And secondly, it believes shares in other developed markets are overvalued to the point where investors may no longer be willing to pay the premium attached to them.
The S&P 500, for instance, reached an all-time high over 4,000 points on Thursday, 1 April. The UK’s investment case has also been bolstered by the fact its economy is bouncing back strongly from the pandemic.
An International Monetary Fund report on future economic growth release on 6 April said the UK was set to outstrip all other developed economies in 2022 – growing by 5.3% this year and 5.1% next year, higher than the US and EU. This would be the strongest annual GDP growth for the UK since 1988. The IMF says this predicted bumper bounce back from the coronavirus crisis is largely down to the Government’s spending blitz to support the economy and prevent long-term scarring. But there are other factors that make the UK an attractive destination for investors too. For example, one of the big drags on the UK’s collective share prices has been Brexit for the past half decade.
It would appear the country is putting this issue firmly behind itself as it has agreed a long-term deal with the EU at the end of 2020 and has already put pen to paper on other trade deals around the world. In the wake of Brexit’s finalisation, the UK is also trying to position itself as a future leader for tech company listings and attracting other new business to its valuable financial hubs. The Chancellor Rishi Sunak is looking at reforms to listing rules to make it easier for fast growing companies to float on the London Stock Exchange. The net effect of this, if successful, is that the UK could play host to some of the most attractive growing companies to invest in in the future.
There are however counter arguments to GMO’s position on UK markets. The FTSE 100 and 250 have performed admirably when considered over 12 months, but still sits relatively low compared to historic averages - it may be that the value drag caused by Brexit has become permanent.
It would require a significant bull run – and for the shine to come off other major nations’ markets -for it to outperform in growth terms. It is also an argument that GMO are not the first to make – for some time UK-focused fund managers have pronounced it to be the most-undervalued market in the world. The upswing has yet to materialise.
The make-up of the index is also an issue. It is not geared toward ‘growth’ in quite the same way, with many firms stronger in terms of dividend income rather than exponential growth. This is partly why Rishi Sunak wants to change the constituents of the FTSE with more tech, but how easy it would be to unseat the incumbents is unclear.
Of course, nothing is certain. While the aforementioned factors all play into a positive outlook for the UK, there are always going to be bumps along the road.
If you’d like to discuss your investment options in the UK or anywhere else more, don’t hesitate to get in touch with your adviser.
Tax Day 2021: inheritance tax changes and tax-as-you-go self-employment on the cards
Tax Day 2021 was hyped up for big changes to the tax system, but instead households were given small tweaks.
Households were braced for a series of tax hikes on so-called ‘Tax Day’ earlier this month – but their finances were left largely untouched. After Chancellor Rishi Sunak’s Budget on 3 March led with a raft of allowance changes, the rumour mill began churning once again as the Treasury announced its intention to publish tax-related measures on 23 March.
What was announced?
The most concrete announcement from the Treasury related to the reporting of estates for inheritance tax (IHT). Currently all estates have to file paperwork to HMRC whether or not they fall above or below the thresholds for paying IHT. The Treasury has scrapped this requirement for estates that sit below the £325,000 threshold to pay. The Treasury says as a result 90% of estates will no longer have to fill out IHT forms but in practice this is a little unclear as it hasn’t explicitly said what the requirement will be to fill one out. With plans to be implemented by 1 January 2022, households will have to wait and see for more detail.
The taxation of trusts was also raised in the update. The Government has been looking at how trusts work for tax purposes with a view to potentially cracking down on some of the methods used to avoid paying more tax from estates. It has however decided to back away from making any changes thanks to what it sees as a lack of ‘desire for comprehensive reform’. While less often used as a means to avoid tax these days, trusts do have some IHT advantages. Individuals can set up trusts worth up to £325,000 every seven years as a means to avoid paying any IHT on that amount of their overall estate without incurring a 20% charge.
Elsewhere, inquiries into changing the way self-employed people pay tax and a closer look at tax avoidance schemes have been announced. While neither of these offer concrete policies, both indicate a direction of travel in government when it comes to obtaining people’s tax in future.
If you would like to discuss any of the themes in this article don’t hesitate to get in touch with your adviser.
The World In A Week - Shuffling of the Cards
Last week local elections took place across the UK that saw the Conservatives extend their dominance over Labour, making a net gain of twelve councils with Labour losing control of eight. Labour’s poor local election performance prompted Sir Keir Starmer to reshuffle his cabinet, with Anneliese Dodds being replaced by Rachel Reeves as Shadow Chancellor. However, there was more promising news for Labour as Sadiq Khan was successfully re-elected as London Mayor for another term.
Elsewhere, the Scottish National Party gained another seat but missed out on a total majority with Nicola Sturgeon stating that they will push forward with legislation to propose a second Scottish independence referendum, which is likely to take place in 2022 at the very earliest. Attention now turns towards Boris Johnson who is expected to set out several new bills aimed to support businesses post-Brexit, with the creation of eight new freeports in England and a bill set to boost housebuilding in northern regions.
With the UK demonstrating that the strong vaccine rollout can curb the transmission rate of the virus, with just over 17.5 million people having now been fully inoculated and hospital admission rates falling significantly, just over 51% of the UK has now received their first dose, which ranks second globally. Off the back of this, Boris Johnson is also set to approve the next stage of the reopening of the UK economy, which includes the reopening of most businesses, including pubs and restaurants serving indoors. Indoor sports and cinemas will also be allowed to reopen, as well as the ability to allow spectators to attend major sporting events.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 10th May 2021.
© 2021 Beaufort Investment. All rights reserved.