Apr30th
N E W S L E T T E R
April 2012
Bruce & Co. By Referral! – Please Refer.
Mis-selling by banks … surely not!!
| In an article in the Sunday Times on 11th March, there was a report that banks including Barclays and HSBC are reportedly facing legal action for mis-selling these types of products. The Sunday Times reported that RBS was so concerned that an internal audit was launched in January on the sales of such products. |
You may recall that last month we spoke about the dangers of buying “guaranteed” products. Most of these products are extremely complicated and are not always what they seem.
If you don’t understand something, don’t buy it. There is no such thing as guaranteed; there is a certain amount of risk with everything. You just need to understand the risks and keep them in proportion.
In his book entitled “Risk”, Dan Gardner sets out how we fail to measure risk correctly, which is why most people invest poorly. The book suggests that we don’t think objectively enough and instead think emotionally.
For example, if interest rates are 2% and inflation is 4%, then putting money in a bank account will mean that you are guaranteed to lose 2% each year. That’s assuming the bank doesn’t go bust. If you asked this question, “Would you invest in something where I can guarantee you will lose 2% each year?” most or all of the people you asked would say no. However, people still put their money in banks and building societies, where this is what will happen. But because they see the same “capital” sum on their statements they feel comfortable, even though that capital sum buys less. Read More »
Mar30th
N E W S L E T T E R
March 2012
Bruce & Co. By Referral!
| Every year you are given the opportunity to save money on which the gains are tax free. This investment opportunity is the humble equity ISA. Equity ISA’s are not totally tax free, the dividends are taxed at 10%, but otherwise tax is largely avoided. |
Tax: Why pay what you don’t need to?
So why is it that so many people don’t use their equity ISA allowance? There are five reasons:
1. They don’t have the money: a large number of people simply don’t have the £10,680 2012 allowance or for this year 2012/2013 £11,280 that you can invest! But that’s no reason not to put something in an ISA. Even if it is only £100 a month, if you are going to invest it, you may as well invest it into an equity ISA. Remember that if you put money into your deposit based ISA your allowance is split equally between equity and deposit.
2. They don’t know about it: hard to believe that there are people out there who are not investing because they don’t know about equity ISA’s, but ask a random group and you will be surprised at the number of people who simply say “It’s not for people like me, those stocks and shares are risky.” Read More »
Feb20th
N E W S L E T T E R
February 2012
Bruce & Co. By Referral!
| Charges are very complicated. In financial services, they are never what they seem.Take for example a company that purports to offer an investment for free! Or will give free advice! |
Change to charges
Now, I understand that if you are working for the Citizens Advice Bureau you may do things for free. But in the world of commerce, and certainly in the world of finance, there is never something for nothing.
We recently reviewed an investment for a new client which he had made through a well known “wealth manager”. This company offers its investment products through agents who work with the company and sell those investments to individuals. These agents receive a commission for each investment sold (typically 5% of the amount invested); yet they claim that the investment was free to the client, and that there was no cost for advice. The company in question is a very successful company that last year made profits of over £500m. The question I have is; how do you make those profits if there is no cost of setting up an investment, and yet you pay your agent a large 5% commission? Read More »
Jan30th
N E W S L E T T E R
January 2012
Bruce & Co. By Referral!
| 2011 was a year of surprises. We had (and still have) the problems in Europe. There were riots in the streets. The US president was unable to do anything in the absence of support from the House and the Senate. |
2011 – What a year! But what about 2012?
We had the stock markets losing money, savings accounts losing money, and inflation at over 5%. All in all not the best of years, certainly from an economic, investment and bank or building society savings point of view.
When looking back you will see periods in the past where the situation was similar or even worse, and hopefully learn from it. Perhaps the most recent period which reflects the present situation is the recession of the 1970s. Those of us who lived through the 1970s will remember what a terrible time it was economically and politically, and the damaging effects it had on the savings and investment world. Read More »
Dec21st
N E W S L E T T E R
December 2011
Bruce & Co. By Referral!
Merry Christmas and a prosperous New Year!
| It’s been a big year for pensions; the government has been putting its take on pensions into the pot which was left by the previous government. This resulted in the abolition of the annuity rules, which was a good thing. It resulted in the abolition of the Alternatively Secured Pension, also a good thing. And it also resulted in the return to “drawdown’s” in pensions, another good thing. The reduction of the Lifetime Allowance, which is due to come into effect next April, is however a very bad thing. |
Consider protection now on BIG pension
In a world where we are concerned with how much income people will have in retirement; where in the future the state will not be able to support the level of pensions; in a world where the retirement date is being pushed further and further back, does it make any sense at all to restrict the amount that people can save in their pension? Read More »
Nov21st
N E W S L E T T E R
November 2011
Bruce & Co. By Referral!
So what’s up with Europe?
| If you are interested in Europe, then read this. If you are not, then read this anyway – it is important. |
The media is full of reports as to the results of the Europe-wide meeting to resolve the issues. The devil will always be in the detail, but broadly speaking the following has been agreed.
- Greece will have it’s debts written down by 50%. This means that half of the money owed by Greece will be written off. If you had purchased bonds in Greece in the past year you would have been rewarded by an 8-11% return. But with that return comes risk, and the risk is that Greece will default. Greece has now effectively defaulted on half of its debt.
- The banks have agreed to increase their capitalisation. This means that the banks have agreed to keep more money, and to lend less. This may sound strange when the press continuously emphasise that the banks are not lending enough. But you can’t have your cake and eat it. If you want to stop the banks crashing, they must keep enough money back to protect themselves for when things go wrong, and they can’t do that if they lend it all. Read More »
Oct21st
N E W S L E T T E R
October 2011
Bruce & Co. By Referral!
| You can’t have missed the constant news about Europe and how the Eurozone is about to implode. But is it? Or is it just hype? How will it affect your investments going forward? To predict what will happen we must first have an understanding of how Europe got to where it is and in turn this will lead to understanding the future. |
Europe – how did we get here?
We have said on many occasions that the outcomes of events driven by economics are easy to predict. Everything effectively is a function of supply and demand, and at the micro level this is what behavioural economics focuses on. The big problem is that politics gets in the way of economics with politicians trying to change the world and its economies through their policies. It all goes wrong because their policies are a function of their belief structure and what they think should happen in the world, which is not necessarily what does happen. And this is precisely the situation which Europe faces.
Way back when, certain countries felt it was better to create a “federation” of Europe’s economies; a “Eurozone” where everyone would have the same currency, and the same economic principles – A great idea politically, but in the real world, a disaster in the making. Read More »
Oct12th
Structured Products
Structured Products
Structured Products
Will you out perform Inflation?
Sep20th
Risk free investments
There is a popular misunderstanding that there is such a thing as a risk free investment.
When you talk about risk free investments, most people will think of putting money into a bank or building society. Only recently, with the failing of Northern Rock and problems with banks around the world have people realised there is even risk in putting money into a bank. Read More »
Aug12th
N E W S L E T T E R
August 2011
Bruce & Co. By Referral!
The seesawing stock markets
| A show of force by US Federal Reserve chairman Ben Bernanke has provided some reassurance to stock markets. But the relief will only be temporary; investors need to be on their guard.
Stock markets around the world have jumped overnight and may recoup more of this week’s losses today after US bank chief Ben Bernanke last night intervened to restore investor confidence after a traumatic 10 days of plunging share prices. |
Bernanke, chairman of the US Federal Reserve, said the central bank would freeze interest rates at their near zero level for at least another two years. He also said the Federal Reserve would consider printing more money in a third round of ‘quantitative easing’ (QE3) in an increasingly desperate bid to inflate the US economy and prevent it falling into a post-credit crunch depression.
In doing this Bernanke was acting like a global financial policeman, delivering the firepower that investors wanted to see in the face of unruly markets. Read More »
