Citigroup Acted. Now, Two New Ideas on How Banks Can Limit Gun Sales.

07/04/2021

Citigroup Acted. Now, Two New Ideas on How Banks Can Limit Gun Sales.

Gene Blevins | Reuters

Customers view semi automatic guns on display at a gun shop in Los Angeles, California.

On Saturday afternoon, as hundreds of thousands of people joined the March for Our Lives around the nation, I was on the phone with Michael Corbat, chief executive of Citigroup.

Mr. Corbat had taken the remarkable step on Thursday of authorizing a new set of rules to restrict gun sales by Citi’s clients, the first time a Wall Street bank had used its position to influence the gun control debate.

Five weeks earlier, a gunman’s attack at a high school in Parkland, Fla., had left 17 dead. Soon afterward, I wrote a column challenging the business world to “effectively set new rules for the sales of guns in America,” given Washington’s intransigence.

How to invest in shares: Your guide to joining the excitement of the stock market

ERIC

06/04/2021

How to invest in shares: Your complete guide to joining the excitement of the stock market

Joanne Hart, Financial Mail on Sunday

and
Simon Lambert

Published:
22:32 GMT, 11 January 2014

|
Updated:
13:15 GMT, 4 October 2015

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Investing in the stock market is a good way grow your wealth long-term, but for newcomers, buying and selling shares may seem daunting.

So here is our guide to getting started in the stock market and becoming a smarter investor even if you already buy and hold shares.

Long-term gains: How the FTSE All-Share Index has performed over the past 30 years. The Red line shows the share price capital return and the blue line the total return with dividends included

The power of dividends

Dividends are payments made to shareholders from a company’s profits, but even profitable businesses do not have to pay dividends. The directors may decide to keep some cash in the firm for expansion.

British company dividends are generally paid twice a year and shareholders can either take the cash or choose to use the money to buy more shares in the company.

Some investors buy shares in companies that typically pay high dividends in order to create an income, even if they do not expect the shares to rise rapidly in value.

Reinvesting dividends in shares can dramatically increase returns over the longer term. Just so long as the shares go up.

The Barclays Equity Gilt Study,
which looks at long-term results from investing, shows that over a
ten-year period the average annual investment return from shares
adjusted for inflation is 5 per cent.

One of the big winners for those investing over the long-term is reinvested dividends, which allows you to benefit from compounding.

The
Barclays study, which uses data stretching back to the nineteenth
century, highlights the importance of reinvesting income. ‘One hundred
pounds invested in equities at the end of 1899 would be worth just £191
in real terms without the reinvestment of dividend income, but with
reinvestment the portfolio would have grown to £28,386,’ it says.

More…

THE MINOR INVESTOR: An honest look at a year’s investing – and the mistakes that I made along the way

Six simple steps for wiser investing – and a better chance of higher returns

How to invest in funds, investment trusts and ETFs – and save money as a DIY investor

The Investing Show: Ten dividend shares for the next five years

Should I stick to shares that cost less?

Some shares can cost less than 1p each, while others can cost more than £50. But low-priced shares are not necessarily better value.

In fact, companies whose shares cost just a few pence are often involved in risky industries, such as mining exploration or technology. What matters most is whether or not you believe a firm is going to do well.

If you want to value shares, then you need to do so using one of the typical valuation methods. The most commonly used is the price-to-earnings ratio or P/E. This compares a company’s share price to the profits it makes per share.

A company with a P/E of 10 is being valued at a lower level than a company with a P/E of 20. This maybe because it is judged to have poor growth prospects or because the market has overlooked it. Always compare share valuations to the kind of company that it is, its peers and the market as a whole.

> Read our guide to understanding share data and company balance sheets

What makes shares go up or down?

Over the long term, the single most important factor is rising profits, or the expectation of them.
Several other factors influence price, though.

If the overall stock market is rising, many shares will be dragged up in its wake and if stockbrokers are optimistic about a particular sector – property for example – then shares in companies in the property sector will benefit.

Remember that the market looks at the future, not the past, so brokers and big investors are far more interested in how a company is expected to do in the years ahead than how it performed last year.

Sentiment is a key driver when it comes to share prices. If the market doesn’t like a company for whatever reason, its share price can remain depressed even as it continues to grow profits.

In contrast, the market may have decided that it loves a company – these are often called story stocks – and rate it more highly than you would expect.

These anomalies in valuation can provide opportunities for investors.

SHOULD YOU INVEST IN FUNDS OR INVESTMENT TRUSTS?

Picking individual shares is not for everyone. You need to make sure you research companies very
carefully, learn to understand how to read their balance sheets and
financial statistics and don’t just get swept along by what the hot tips
of the moment are.

The
classic share investor’s mistake is to buy too few different companies.
A report by specialist magazine Investors Chronicle said the ideal
number of shares for a portfolio is 15, spread across different sectors.

A simple way around this is to invest
in either active funds or investment trusts, where a fund manager
chooses a basket of shares for you, or in passive tracker funds or
exchange traded funds, which follow an index up or down.

Fund managers will tell you that the
advantage of an active fund is their expertise but you actually have to
choose the right manager to benefit from this. Many consistently fail to
beat their benchmark and still levy their fees – a handful do actually
outperform year after year.

Of course, investing in shares and funds does not have to be mutually exclusive. One investing idea is to build a core portfolio of funds and use a smaller part of your portfolio to add some spice by dabbling in picking individual shares.

How do I buy and sell shares?

When a company first floats on the stock market, such as Royal Mail did, it is sometimes possible to apply for shares directly from that firm. This is known as an Initial Public Offering (IPO).

Generally, however, shares are bought through a stockbroker or a financial services firm.

Many of these firms allow investors to buy and sell shares online simply by filling out an online form. Investors can also buy and sell shares over the phone by ringing a stockbroker or a financial adviser.

The best bet for a DIY investor is
one of the many investing platforms available, ranging from those that
offer funds only, to those that allow you to invest across shares,
funds, investment trusts, bonds and more.

These will allow you to set up an
account online and then pay in a lump sum to invest how you choose, or
sign up for regular direct debit monthly payments into a selection of
investments – or do both.

Most
platforms are very simple to use and easy to get used to. They will
offer varying degrees of tips, analysis, tools and service.

This is Money’s best DIY investing platforms round-up, highlights some of our favoured platforms and explains how their charging works.

How much does it cost to buy and sell shares?

Costs vary according to the service you need. If you are just buying or selling online – known as execution-only trading – flat fees can cost as little as £2.50 or up to about £15.

The more trades you do, the cheaper each one is. Stamp duty of 0.5 per cent is charged on purchases of shares outside the junior AIM market.

Some investors like to seek help from their brokers. Many offer ‘discretionary’ services, where they run a share portfolio on your behalf, as well as ‘advisory’ services, where they offer advice but leave it to you to decide what to buy and sell and when. The more advice you take, the more it costs.

JARGON BUSTING

Main Market: The flagship market of the London Stock Exchange. Large, established companies are listed on this market and they have to satisfy certain regulations before they are allowed to join it.

AIM: Originally called the Alternative Investment Market. Also part of the London Stock Exchange, it is designed for smaller companies. The regulations are less strict than for the Main Market, but companies still have to satisfy certain criteria before joining.

Income Stock: Shares that pay generous dividends are known as income stocks because they provide shareholders with an annual income.

Growth Stock: Fast-growing companies, often small and on AIM, are known as growth stocks. They rarely pay a dividend.

Yield: If you buy a share at 100p and the company pays a dividend of 5p, that share is offering a 5 per cent yield. The yield is calculated by dividing the dividend by the share price and multiplying by 100.

Capital Gain: If you buy a share at 100p and sell it at 120p, the 20p that you have made is referred to as a capital gain.

How do I choose which stockbroker to use?

This depends on what service you want. Investors who just want to trade online may be tempted to seek out the cheapest provider.

That is fine, as long as the firm is regulated by the Financial Conduct Authority.

Some investors may prefer dealing with a firm whose name they recognise and websites differ too, so it is important to find one that is easy to navigate.

Investors who are looking for advice as well as trading services should talk to a range of brokers before making any firm decision. Look for a broker that you trust and respect.

How long should I hold shares?

Shareholders can be divided into traders and investors.

Traders buy and sell shares frequently, hoping to make quick profits. Investors hold on to their shares for at least five years and generally a lot longer.

Long-term investment in shares should prove rewarding, particularly when investors reinvest their dividends to acquire more shares.

Sometimes, however, if a share has risen significantly, investors might choose to sell some of their stock. This is known as top-slicing.

What should I consider before buying?

The first point to consider is whether you can afford to lose the money. Shares are not risk-free investments, so if you need the cash to pay the mortgage or school fees, tread very carefully.
It is also useful to do your own research.

Read a company’s latest annual report, look at its website and seek advice from your broker. Think about your investment aims and your time horizon, too.

This will influence the type of shares that you want to buy. Big, stable companies with decent dividends tend to deliver long-term rewards. Smaller, riskier companies can offer short-term excitement.

Finally, if you do fancy trading, rather than investing, it can be helpful to set price targets so that you sell at least some of your shares once you have made a profit.

How to invest with the rising stars of emerging markets

ERIC

05/04/2021

As the veterans of emerging market investing retire, who are the fund managers you can rely on? MAIKE CURRIE picks the best of the rising emerging market investors.

Investing in emerging markets is not for the faint-hearted.

While these markets have a lot going for them – abundant natural resources, young populations, a rising middle class, the bulk of the world’s population and superior growth prospects, they also come with a good dollop of risk.

Investors need to stomach heightened volatility, geopolitical risk and the corporate governance issues that often come with investing in the region.

Old Mutual Asia Pacific Fund is managed by Ian Heslop

Despite all of this, Asia is still chronically under-owned by global investors. As a consequence the region is relatively cheap, with the exception of India which remains the destination of choice for investors.

The Stewart Investors Asia Pacific Leaders Fund, once managed by Angus Tulloch who officially retired in September this year, is a top performer in this space.

David Gait took over the reins of the flagship fund from Tulloch back in 2015, and alongside co-manager Sashi Reddy, has managed to keep performance on course.

The common thread linking investments in this fund is that each has a high degree of ‘social usefulness’ – they provide goods and services that society actually needs.

This makes the portfolio resilient in the face of change and means investors can rest easing knowing the fund invests in sustainable businesses committed to a sustainable future.

Another fund worth taking a look at is the Old Mutual Asia Pacific Fund managed by Ian Heslop and his team using a numbers driven investment process to make investment decisions based on objective criteria. This frees up their investment strategy from the biases which often impact human reasoning.

The manager believes that in general, there are more ‘inefficiencies’ to be exploited in the Asia Pacific region compared to the other markets in which they invest, and judging by the fund’s stellar performance alone, he’s right on the money.

Maike Currie is an investment director at Fidelity International and the author of The Search for Income – an investor’s guide to income-paying investments. The views expressed are her own. @MaikeCurrie

Short-seller Andrew Left is now betting against Twitter

ERIC

04/04/2021

Short-seller Andrew Left is now betting against Twitter

Michael Newberg | CNBC

Andrew Left, executive editor, Citron Research

Citron Research’s Andrew Left is betting against Twitter less than two months after the short-seller made an unusual and public bullish bet on the social media company.

Rovio CEO: Gaming companies ‘quite new’ to the stock market

ERIC

04/04/2021

Rovio CEO: Gaming companies 'quite new' to the stock market

Rovio CEO: Gaming companies new to the public market 11:55 AM ET Mon, 26 March 2018 | 03:03

Gaming firms are “quite new” to the stock market and are still learning “how the game needs to be played,” the chief executive of Rovio Entertainment said.

Heartening proof that you CAN get rich by doing good…with ‘impact’ investing to help the world

ERIC

03/04/2021

Scrooge might choose to build wealth for wealth’s sake. But more socially-minded individuals are putting their money where their morals are.

At its simplest this means being an ethical investor, where ‘sinful’ money generators such as tobacco or firearms manufacturers are not welcome in a portfolio of shares or funds. But screening out too many such offenders often means foregoing investment returns.

There is a more positive way to profit from your principles by backing companies seeking to solve the world’s key social and environmental issues. It is now commonly known as ‘impact’ investing.

Xylem is a firm that advises organisations on how to reduce their water consumption

Mark Dampier, of investment platform Hargreaves Lansdown, says impact investing has some way to go before it enters the mainstream. He says: ‘It is a small and immature market where available investments for investors are few and far between.

‘Aside from a few bond funds, such as Threadneedle Social Bond, investors are hard pressed to find appropriate funds they can slot into their portfolios.’

Ethical assets make up just 1 per cent of the total

Others are more upbeat. Rebecca Jones, at Good with Money, says: ‘There has never been more opportunity for investors to make a real impact with their money.’ She likes renewable energy funds Foresight Solar and Greencoat Wind. Another option is the Triple Point Social Housing Real Estate Investment Trust. This invests in building social housing for those with long- term learning disabilities.

Additional options include the Liontrust Sustainable Future range. Ethical bank Triodos has two socially responsible investment funds – Sustainable Equity and Sustainable Pioneer. The former invests in Japan National Railways which builds high-speed trains that compete on price and speed with more environmentally unfriendly planes.

Other funds include M&G Positive Impact, Edentree UK Amity and Rathbone Ethical Bond.

Barclays Multi-Impact Growth, launched less than a year ago, invests in other funds that meet its manager’s environmental and social impact criteria. The bank’s Smart Investor platform also highlights funds suitable for impact investors.

Fund aimed at young…and ‘groovy grandparents’

Investment house Aberdeen Standard hopes its new fund – The Global Sustainability Trust – will help feed the growing appetite for social and environmental impact investing.

Although recent research by Barclays suggests the trend is driven by younger investors, Aberdeen Standard expects ‘groovy grandparents’ – with money to spare – to wake up to the benefits. The trust has an initial target of £200million – money which it will use to invest in companies that align with the United Nations’ sustainable development goals.

These are firms that primarily assist in providing sustainable energy, food and agriculture. The trust will work with venture firm Bridges Ventures in finding suitable private equity opportunities.

In the past, Bridges has backed World of Books, a company that buys unwanted books from charity shops, identifies which ones are worth selling second-hand through Amazon, before sending the rest to be pulped.

Charity shops benefit and pulping volumes are reduced. Roger Pim, manager of the new trust, says: ‘At least 95 per cent of investment opportunities in the social and environmental impact area are private companies. We will be the only investor in many of these businesses and will seek ones aligned to our sustainable goals.

‘The investment trust structure offers private investors access to a diversified portfolio of opportunities not otherwise available to them.’

The initial offer for shares in The Global Sustainability Trust closes on December 11. You can apply via registrar Computershare or investment platforms such as Alliance Trust and Hargreaves Lansdown. Minimum investment is £500. For information, visit globalsustainabilitytrust.co.uk.

Investors, beware of these 4 biases

ERIC

03/04/2021

Alain Shroder | ONOKY | Getty Images

Eliminating all biases when investing is nearly impossible. Financial markets are a prime example of the way human biases can manifest at either end of a spectrum of emotions: This is the core of behavioral finance, where the study of economics and psychology intersect.

Seven rules to stick to when investing for retirement

ERIC

02/04/2021

While every saver is different, there are a few golden rules that everyone should stick to when it comes to investing for retirement.

Here we run through some of the prime principles…

Finance check: Keeping an eye on your investments is key to making sure your funds are performing as expected

REMEMBER YOUR INCOME GOALS

It’s easy to get side-tracked from your strategy when you read about exotic funds that have doubled investors’ money.

But if what you need is income, then these funds are not much use to you.

Remember the reasons why you picked your investments and only change them if they’re not performing or your needs have changed.

Not only will this keep you on track, but it will avoid your returns being eaten up by the costs of buying and selling funds.

Mr Clark says: ‘Frequent trading can eat into returns so buy and sell funds as little as possible.’

DON’T GET OVERCHARGED

Each pension provider has a different charging structure and it is important to work out which is best for you.

Some providers will charge a flat annual rate, others will charge you each time you want to withdraw money.

How do I vote if I own shares in a nominee account not paper?

ERIC

02/04/2021

I was shocked to find I couldn’t vote on the Unilever move abroad because I hold the shares electronically.

How do I make sure I can exercise my right to vote the next time one of the companies I have shares in wants to do something like this?

Mark Taylor: ‘Due to the disadvantages of paper certificates, the preferred method of holding shares these days is via a nominee’

Mark Taylor, chief customer officer at financial services firm Equiniti, replies: Firstly, it is useful to understand what it means when an investor says they hold shares ‘electronically’.

Most shares these days are held digitally in what is known as a nominee account.

Broadly, this means that the name of an individual does not appear on the share register of a company.

Instead the name of the nominee company, which is holding the shares, does.

It is the job of the nominee company, typically a stockbroker or online platform, to keep your shares safe and ensure that you receive the rights associated with your shareholding as if you were a shareholder appearing on a register.

The nominee company approach is quite common these days.

It is a more efficient way of holding shares and ensuring that trades can be settled, usually through a system known as CREST.

Why do many people hold shares digitally rather than on paper nowadays?

The alternative would be for a shareholder to hold paper certificates and have their name entered onto the company’s share register. This approach has a number of drawbacks.

Each time the individual sells stock in that company the appropriate level of share certificates needs to be submitted to cover the sale.

In addition, if the shareholder elects to re-invest dividends, then each time they will receive a share certificate. Some companies pay dividends quarterly, while others pay twice or only once a year.

Over time these share certificates build in number and sometimes shareholders lose them. They can be replaced, but at a cost, which depends on the value of the shares held.

Normally, there will be administration fee (the cost of recording the original lost certificate, the issuing of a letter of indemnity and the production of a new certificate) and a countersignature fee (the cost of the insurance to protect the issuer from a misuse of the original certificate).

For guidance, Equiniti’s administration fee is £42 including VAT for shares worth £100 or above, and nothing for those worth less.

Its countersignature fees vary from £23.32 for shares worth between £50 and £1,000, to £675.68 for shares worth between £75,000 and £100,000.

It costs nothing for shares worth less than £50.

For shares worth £100,000-plus the investor would need to contact Equiniti (or their appropriate registrar) as the cost would be subject to the value of the stock in excess of that.

The shareholder can source their own indemnity countersignature from any market provider.

Due to the disadvantages of paper certificates, the preferred method of holding shares these days is via a nominee.

You can exercise your rights to vote and attend AGMs either way, but because using a nominee means you are not named on the share register the process is different.

How do you vote if you hold shares electronically?

If a shareholder using a nominee contacts the nominee company then they should be able to vote and receive the annual report and accounts as well as attend an AGM.

However, the individual must make this request. It is not automatic.

Therefore, each time there is a vote the shareholder would need to make the request. It is a similar situation if they wish to attend an AGM. They need to make contact.

Some companies make a nominee account available for their individual shareholders. This is known as a Corporate Sponsored Nominee.

The CSN works by removing investors’ names from the main register and holding them together with other investors in the nominee company.

A separate register of underlying individual investors is maintained behind the scenes by the nominee.

Investors will still enjoy the benefits of owning shares, retain the right to receive dividend payments and the company will usually make available financial information and arrange for you to attend and vote on matters put to general meetings of the company.

Essentially, a CSN is deemed as an extension to a share register and therefore company communications are automatically sent to somebody that has stock held on their behalf by a CSN.

If the company you have a holding in has a CSN, there is a simple form to complete to sign up.

There is no charge to transfer shares into a CSN. Once in the CSN there are no ongoing management fees.

What happened in the Unilever case?

In the case of Unilever, many investors held their shares in nominee accounts, but the company stated that the large brokers would only count as a single shareholder vote, instead of counting the votes of every shareholder in the nominee account.

This is not something that happens regularly, and in case of similar votes in the future, investors looking to have their say should understand how their stock in a specific company is held, look out for communications from the company if they are held via a CSN and get in touch with their nominee company if they are held via a nominee account.

Safeguard your fortune with the one investment that’s…guaranteed solid gold

ERIC

31/03/2021

When stock markets plunge and the world economy is threatened, one asset normally worn around rich people’s necks has its moment to shine in the spotlight.

Step forward gold, considered by many as a safe haven in stormy times.

In recent weeks, as markets worldwide have corrected sharply and a full-blown trade war between two of the globe’s powerhouses – the United States and China – looks increasingly likely, the gold price has rallied.

Shining in the spotlight: Gold is considered by many as a safe haven in stormy times

From a year low in August of $1,180.40 an ounce, it rose to $1,233.85 by the end of last month before falling back slightly and then rising again to $1,232.

Although the price remains lower than it was this time last year, there are some investment managers who now believe gold has a key – if minor – role to play in putting together a diversified portfolio.

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HOW THIS IS MONEY CAN HELP

How to choose the best (and cheapest) DIY investing Isa – and our pick of the platforms

One such individual is David Coombs, head of multi-assets at investment house Rathbones. Normally sceptical of gold as an asset class, he has built a three per cent holding in the £532 million Rathbone Strategic Growth Portfolio that he manages – a fund aiming to provide investors with returns in excess of inflation. It does this by investing in a broad range of assets including equities, bonds, private equity and commodities.

‘My long-term view on gold has not changed,’ says Coombs. ‘If you like it, wear it and don’t invest in it. Gold provides no income which is a big ‘no no’ for many investors, especially when interest rates are on the rise and cash and bond yields become more attractive.

‘But given the uncertain times we are currently living through here in the UK with all the speculation over Brexit, I do believe it has a role as a hedge.’

Personal Assets currently has eight per cent of its assets in solid gold

According to Coombs, the hedge is against the threat of ‘stagflation’ [economic stagnation combined with inflation] triggered by a Brexit deal not being done.

‘The UK economy is vulnerable to stagflation if a Brexit deal is pushed out,’ he explains. ‘Businesses will stall on capital investment projects and we could see UK economic growth slow and unemployment rise with inflation persisting – the ingredients for stagflation. If that happens, gold will represent a store of value.’

Although a pessimistic voice (a view not shared by investment guru Neil Woodford), Coombs is not alone in looking at gold as an asset diversifier.

Investment trusts Personal Assets and Ruffer both have exposure to gold. Like Coombs’ fund, both Personal Assets and Ruffer are broadly diversified and are designed to maintain the real value of investors’ holdings. Personal Assets currently has eight per cent of its assets in solid gold (bullion) while Ruffer has seven per cent exposure through shares in gold mining companies.

Jason Hollands, of wealth manager Tilney, says some of the portfolios it runs for private clients have around two per cent exposure to gold. He says: ‘We do not see gold as a low-risk asset per se. Gold prices have at times endured long losing streaks and out of the last five consecutive 12-month periods, four have seen the gold price fall. ‘Also, a strong dollar is not good for gold because it means the currency is seen as a safer haven. Indeed, a strengthening dollar is often accompanied by a weakness in the gold price.

‘Our reasoning for holding gold for clients is as an insurance policy in the event of a collapse in confidence in the financial system. Like most forms of insurance, it will only kick in as a driver of returns in exceptional circumstances.’

For investors, there are a number of ways to get gold exposure.

The cheapest and most straightforward approach is to buy an investment that tracks the gold price. These are called exchange traded funds and are provided by the likes of iShares (part of asset manager BlackRock) and Invesco. They can be bought through a stockbroker and most fund platforms.

Purchases will incur a dealing charge and there will be an ongoing annual fee on the fund. For example, iShares Physical Gold has a fee of 0.25 per cent.

An alternative approach is to buy a fund with limited exposure to gold – such as Personal Assets, Rathbone Strategic Growth or Ruffer. Or more targeted funds such as BlackRock Gold & General and Ruffer Gold.

With the exception of Personal Assets, these funds invest in the shares of gold mining companies rather than physical gold. Companies such as Randgold Resources and Fresnillo – both components of the FTSE 100 Index – and further afield Australian-based Newcrest.

Duncan MacInnes, investment director at Ruffer, believes there is a strong case for investing in gold mining shares rather than buying a fund tracking the gold price.

He says: ‘Over the past 15 years the gold price is up by some 110 per cent. Yet mining-related equities over the same period have fallen in price on average by 30 per cent.’

He adds: ‘Gold companies are cheap and unloved. The economic backdrop could develop favourably for gold, or the market at some stage could reappraise the value of gold mining companies.’

MacInnes says the proposed merger of Randgold Resources and Canadian-based Barrick Gold – ‘a totemic deal’ – could herald a bout of industry consolidation, leading to lower costs and more profits for shareholders.

Finally, physical gold (bars and coins) can be bought from an online bullion dealer – the likes of Goldcore and Bullion Vault – or the Royal Mint. Buyers can ask to have it stored, for a charge, or delivered.

With Christmas in mind, Royal Mint is offering the gold ‘cracker’ set – six crackers hiding between them a one-ounce bar, three gold coins, a silver money clip (with a gold half sovereign) a gold diamond necklace and gold cufflinks. All for a mere £5,000.

Four tips to protect your investments against a fall

ERIC

30/03/2021

As investors we’re constantly told that ‘markets can go up as well as down’. But if you’ve forgotten the last part, it’s probably because 2017 was a year of almost all up and very little down.

Not only did most stock markets hit new record highs, they did so with very few shocks along the way.

It was a year in which the dogs didn’t bite – or even bark – for that matter. Despite all the dramatic headlines around the Trump presidency, Brexit negotiations and North Korean sabre rattling, concerns over political risk were never realised.

Maike Currie: If wage growth finally picks up we could also see an unexpected rise in inflation

4. Prepare for higher inflation

Wage growth has been paltry for almost a decade now, but if this changes we could see inflation start to pick up. Now might be a prudent time to add a bit of inflation protection to your investment portfolio.

Maike Currie is investment director at Fidelity International and the author of The Search for Income – an investor’s guide to income-paying investments.

The views expressed are her own. Follow her on twitter @MaikeCurrie

Gold has long been seen as a useful hedge against the wealth-eroding effects of inflation.

The Investec Global Gold Fund provides an effective way to gain exposure to the yellow metal via a diversified portfolio of gold mining company shares.

Co-managers George Cheveley and Hanré Rossouw can also invest in physical gold ETFs and companies which mine for other precious metals.

Alternatively, if you want to buy a slice of physical assets that could rise with inflation while still maintaining exposure to the stock and bond markets consider a multi asset fund which can blend equities and bonds with assets such as commercial property and commodities to cover most bases.

Fund and trust ideas for first time and cautious investors

ERIC

28/03/2021

If you are new to investing then the huge number of funds and investment trusts on offer can be confusing. Fortunately, This is Money’s experts have some ideas to get you started.

From the bafflingly wide range, they have picked some ideas to use as starting points for what will hopefully be a successful investing career.

Of
course, which fund is best for you depends on your individual
circumstances and what investing story you think will unfold. So, always do your own research, choose your investments carefully and hopefully you will make your own investing luck.

Starting out: Fund tips for beginner or cautious investors

How to use our fund and investment trust ideas

This is Money asks our panel of experts to suggest investments for a variety of investors.

These are people with a long
history in the investment field and looking at their choices gives you
some pointers. But remember, these are just ideas and whether a particular fund is right for you is your own
decision and making that requires deeper research.

Their ideas are suitable for investors opting to use an Isa wrapper or not. Go to the bottom of the page to find out why we like investing through an Isa.

Read the tips, follow the links to the funds’ performance and read This is Money’s Investing section to gather ideas. If you have any doubts, talk to an IFA [find an adviser].

The expert’s fund and investment trust ideas

Gavin Haynes, managing director of Whitechurch Securities, picks:

Newton Real Return

Ongoing charge: 0.79%

Yield: 2.3%

This fund invests across different asset classes and manager Ian Stewart focuses solely on producing a positive absolute return. The fund is targeted to outperform cash by 4 per cent on a rolling, three-year basis (although positive returns are not guaranteed).

Haynes says: ‘Stewart will build a portfolio for the long-term, while also making good use of derivative strategies to enhance returns and control risk.

‘He is a proven effective asset allocator who is supported by a strong team to draw ideas for the portfolio. He has a cautious view of the world and the fund is defensively positioned, making it a suitable choice for the more cautious investor.’

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How to invest in funds, investment trusts and ETFs

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Adrian Lowcock, head of investing AXA Wealth, highlights:

Henderson Cautious Managed

Ongoing charges: 0.71 per cent

Yield: 3.1 per cent

The aim of this fund is to provide investors with a combination of income and growth by investing in UK shares and bonds. It limits the amount of risk it takes by capping the amount it invests in shares at 60 per cent of the portfolio.

Top holdings include BP, HSBC and Astrazeneca.

Mr Lowcock says: ‘Manager Chris Burvill adopts a simple investment approach by considering the economic environment. He adjusts the fund’s positioning between shares, bonds and cash.

‘The equity element of the fund is largely focused on high-yielding, UK shares. He combines the fixed income element to provide some protection against more volatile equity markets. By adjusting the asset allocation he looks to mitigate the volatility of a pure equity fund. This fund can provide a good core for investors looking for a diversified UK exposure given its flexible approach.’

Jason Hollands, managing director of Tilney BestInvest, suggests:

Invesco Perpetual Global Targeted Returns

OCF: 0.82%

Yield: 1.00%

2016 is shaping up to be a volatile year of the markets, so cautious investors should have absolute funds on their radars, explains Hollands.

‘These are funds that aim to generate positive returns across different market environments and aren’t heavily dependent on overall markets rising – though they aren’t guaranteed to escape losses.

‘There are a wide range of investment techniques to try to achieve this, but this fund provides a “one stop shop” approach to absolute return investing, as it is effectively an umbrella fund that invests in around 25 underlying, distinct investment strategies, which invest across a wide range of asset classes including shares, bonds, currencies and interest rates from around the world.’

He says the fund targets a return, before costs, of 5 per cent a year over and above UK interest rates as measured by three-month LIBOR, on a rolling three-year time period.

‘Importantly it aims to achieve these returns with less than half the volatility of global stock markets. While the fund was only launch in late 2013, key members of the team managing it had previously worked on Standard Life Global Absolute Return Strategies fund, the biggest fund of this type and so far, it has proved the steady eddy it set out to be.’

John Newlands, of Brewin Dolphin, highlights:

Witan Investment Trust

Ongoing charges: 0.89 per cent

Yield: 2.36 per cent

The Witan Investment Trust seeks opportunities from global equity markets, putting your money in a variety of countries and sectors which should spread your risk.

Holdings include RELX, Diageo, Unilever and The London Stock Exchange.

Mr Newlands says: ‘My current choice in this category is Witan – a trust formed in 1909 originally to host the fortunes of the Henderson family, whose finances at that time have been described as “so complex as to rival those of a small nation”.

‘Today, Witan is a slick, modern, professional operation to which smaller investors can gain access by buying a single share. Moreover Witan, which has been managed by the able and enterprising Andrew Bell since 2010, could offer an outlet for regular savings plans of say £100 or more per month for teenagers, grandchildren or just for yourself.’

Darius McDermott, managing director of Chelsea Financial Services, picks:

Rathbone Strategic Growth Portfolio

Ongoing charges: 0.5%

Yield: 1.3%

This fund invests in other funds, investment trusts and passives and McDermott says the manager, David Coombs, is very adept at finding lesser-known, but extremely good investments.

‘It has a big focus on delivering this via a risk-controlled framework. It’s a great one-stop shop for first-time or cautious investors wanting some diversification.’

How to invest in an Isa

Making the most of Isa investing is
not just about picking investments wisely, it’s also important to make
sure you hold them in the best place.

That means keeping fees down to a minimum but also making sure your platform is right for you.

Read our essential guide

Patrick Connolly, chartered financial planner at Chase de Vere, picks:

HSBC FTSE All Share Index

Ongoing charges: 0.07%

Yield: 3.6%

Connolly says investors should have long-term exposure to the UK stock market and ‘the advantages of investing in a tracker fund are lower charges, little likelihood of significant underperformance and no concerns about fund managers leaving. A tracker fund can be a true buy-and–hold option’.

Of this HSBC fund, he says the company is a proven passive manager ‘and the HSBC FTSE All Share Index fund aims to track the performance of the FTSE All Share Index’.

He adds: ‘The largest holdings will always be in the biggest companies listed on the London Stock Exchange and include the likes of HSBC, British American Tobacco, GlaxoSmithKline, BP, Royal Dutch Shell and Vodafone.

‘The fund uses full replication of stocks for all of the major shares in the index and has an annual charge of around 0.07%.’

Why invest through an Isa?

Investing with an Isa is one of the few
opportunities we have for making money with very little tax but it
doesn’t offer complete tax-free status.

Every year the Government gives us a
tax-free Isa allowance.

Your Isa allowance for 2015/16 is £15,240 under the New Isa
regime. You can move money from an investment Isa into a
cash Isa under the new rules or put your whole allowance in a cash
Isa. This applies to any money you have invested in previous years.

Any gains within an Isa are
free from capital gains tax. Everyone has a CGT allowance of £11,000 per
year and many may feel they are unlikely to ever make more than this in
profit each year from selling their assets.

However, those who invest
consistently over time may one day be surprised at how much those
investments are worth and holding them in a tax-free wrapper makes
sense.

This is because
if they opt to sell all or a large amount of their investments at one
time and they are not held in an Isa, then they may be over the capital
gains tax limit and face a tax bill. Whereas, hold them in an Isa and
you have no such problem and will not even need to fill in a tax form if
you sell.

Income from investments is
also treated in a more tax-friendly way in an Isa. Corporate bonds and gilts
income is tax-free.

Dividends and shares income are still taxed at 10%
before they are received, so basic rate taxpayers will not gain any
extra benefit, but higher rate taxpayers do not have to pay any extra
tax that would normally be incurred.

if you are a basic rate
taxpayer you may hope to be a higher rate taxpayer one day, so putting
your investments in a tax-free wrapper is a sound tactic. Investing
through an Isa also removes the headache of filling in a tax return for
both income and capital gains.

Gold isn’t an investment it’s a bet on people freaking out

ERIC

28/03/2021

Do you own any gold? Beyond the wedding ring on my finger, I don’t.

I get the reasons for buying it, from a long-term store of value, to the idea of it as an investment insurance policy, but I’ve never taken the plunge and stuck some in the Minor Investor portfolio.

Recently though, I’ve been wondering whether this is a mistake. Should I perhaps buy some gold?

Thw world’s most famous investor Warren Buffett isn’t a fan of holding gold

It’s been called a hedge against high inflation and a defence against fickle modern-day money, but really gold tends to rise substantially when people are very worried.

This is where the idea of investment insurance comes in. You stick 10% of your portfolio in gold and that really pays off is when everything else is tanking.

For much of the time, gold’s price will remain in the doldrums, and quite possibly drift lower, but when things get really bad it should jump. Look at how this happened in the financial crisis.

Interestingly, Buffett wrote that letter just as gold properly came off the boil. Today, it’s still down a third in US dollar terms on its 2011 peak above $1,900.

Demand remains robust, but there’s not enough at the margins to boot the price up again. To find out who is currently buying gold and why, I invited Adrian Ash, of BullionVault, onto the Investing Show, which you can watch below.

If that prospect of cheaper gold sounds good, there is one slight problem if you are a British buyer. The price in pounds is nowhere as far off the peak in sterling as it is in dollars.

Gold is priced in US dollars and although that dollar price fell after a summer peak for the year, sterling’s post-Brexit vote slump means that gold still returned a hefty 30 per cent in pounds last year.

At the time of writing an ounce of gold will cost you £945, compared to about £1,130 at the 2011 all-time high. So gold in sterling is off about 16 per cent from that peak.

So why think about buying some now?

Firstly, something bad happening is still an outside chance, but one that seems more likely. Secondly, back in 2011, everywhere you turned investors were thinking about buying gold, and now that’s not the case.

Gold is still in demand, but it will be much more in demand if something bad happens.

Buffett said: ‘Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.’

Overall, I agree with Buffett.

Gold isn’t an investment, it’s a bet on people freaking out. But I do wonder whether that insurance might be worth buying at the moment.

ISA INVESTING TIPS: Fund and trust ideas for income investors

ERIC

27/03/2021

Income investing is not just for those who wish to draw a cash return on their portfolio, reinvested dividends are also a great way to build solid growth over time.

If you had invested £100 in the UK stock market in 1945 it would have been worth £179,695 by 2015 with dividends reinvested, or £9,148 without, according to the oft-cited Barclays Equity Gilt study.

Funds and investment trusts are an ideal method for income investing, as by holding a basket of equities or assets they spread risk.

Income investing: Dividends can deliver both a healthy boost to long-term growth and a way to earn from your investments.

Income funds and trusts invest in portfolios of companies that pay a consistent dividend.

Unlike investing in individual shares, risk is spread across a range of businesses and sectors and it can be less volatile than a growth fund as you are putting money into more established firms.

The power of income: How investments would have fared with or without dividends reinvested

The huge number of funds and investment trusts on offer can be confusing though.

Fortunately, This is Money’s experts have some ideas to get you started.

They have picked funds and trusts to use as starting points for what will hopefully be a successful income investing career.

Of course, which fund is best for you depends on your individual circumstances and what investing story you think will unfold.

So, always do your own research, choose your investments carefully and hopefully you will make your own good investing luck.

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How to use our fund and investment trust ideas

This is Money asks our panel of experts to suggest investments for a variety of investors.

These are people with a long history in the investment field and looking at their choices gives you some pointers. But remember, these are just ideas and whether a particular fund is right for you is your own decision and making that requires deeper research.

Their ideas are suitable for investors opting to use an Isa wrapper or not. Go to the bottom of the page to find out why we like investing through an Isa.

Read the tips, follow the links to the funds’ performance and read This is Money’s Investing section to gather ideas. If you have any doubts, talk to an IFA [find an adviser].

The experts’ fund ideas

Jason Hollands of Tilney Bestinvest recommends:

Standard Life UK Equity Unconstrained fund

Ongoing charges: 0.9 per cent

Yield: 3.7 per cent

‘Income fund managers need to take care to dodge potential landmines and roam across the whole market to find robust businesses with the scope to grow their dividends through thick and thin,’ says Hollands.

‘While most equity income funds focus on large, ‘blue chip’ FTSE 100 companies, the Standard Life UK Equity Income Unconstrained fund will use the whole bandwidth of the UK stock market and invest in medium sized and smaller companies, as well as FTSE 100 big names.

‘Manager Thomas Moore, an industry rising star, is prepared to avoid some of the major names in the market where he sees the risk of a dividend cut. Key holdings include Sage, a global leader in accountancy and payroll software, insurers Aviva and Legal & General and telecom firms BT and Vodafone.’

Darius McDermott, of Chelsea Financial Services recommends:

Premier Multi-Asset Monthly Income fund

Ongoing charges: 1.42 per cent

Yield: 4.6 per cent

This fund is designed to produce a high, sustainable income combined with strong absolute and relative growth through robust risk management.

McDermott says: ‘The team invest in a broad range of assets, investments, managers and funds and have a demonstrable capability for producing excellent results.

‘With a yield of almost 5 per cent, which is paid monthly, it’s a great alternative for income-seekers.’

Patrick Connolly, chartered financial planner at Chase de Vere recommends:

Rathbone Ethical Bond fund

Ongoing charge: 1.11 per cent

Yield: 3.7 per cent

‘This is the ideal fund for income investors on a number of levels. It typically pays a competitive yield of around 5 per cent, benefits from a good quality fixed interest manager and invests in many underlying holdings that aren’t found in other funds, meaning it also provides strong diversification benefits,’ says Connolly.

Fund manager Bryn Jones has run this fund since 2004. He aims to invest in good-quality investment-grade bonds and adopts a proven process of looking at investment themes, credit analysis, valuations and risk, before conducting the ethical screen.

‘The ethical emphasis means that the fund contains some interesting bonds paying competitive yields, such as a UK disability charity supporting disabled people and their families, a not-for-profit company focusing on social housing and a mentoring programme for ex-offenders working with social housing associations.’

Gavin Haynes of Whitechurch Securities recommends:

Artemis Global Income fund

Ongoing charge: 0.84 per cent

Yield: 3.8 per cent

‘For UK investors, investing in dividend-producing shares has long been a staple ingredient of their investment portfolios and I believe it makes sense to diversify equity income exposure overseas,’ says Haynes.

‘Over 90 per cent of stocks that yield in excess of 3 per cent in the MSCI World index are based outside of the UK. In a global economy currently dominated by low interest rates, dividend yield will continue to be an important part of the total return equation.’

This fund has been managed by Jacob De Tusch-Lec since inception in 2010, and performance has impressive versus the competition.

‘It follows a contrarian approach with the manager deliberately seeking out companies within global markets that are being overlooked or are out of favour.

‘This approach can provide high dividend yields and the fund is currently offering around 4 per cent.

‘The fund has no constraints with regards investment size, industry or region, and the portfolio reflects where De Tusch-Lec sees value in global equity income stocks. The fund’s regional allocation highlights its high conviction approach with 40 per cent of the portfolio currently invested in Europe.’

Investment trust ideas

John Newlands, head of investment trust research at Brewin Dolphin, highlights:

Finsbury Growth & Income

Ongoing charges: 0.8 per cent

Yield: 2 per cent

Run by investment manager Lindsell Train, the principally UK-focused portfolio has a heavy emphasis on branded consumer goods and services such as Diageo, Unilever, Heineken, and AG Barr.

Other leading holdings include RELX (the former Reed Elsevier), financial services companies such as Schroders, Hargreaves Lansdown and, to recent profitable effect, the London Stock Exchange.

Newlands says: ‘The manager Nick Train tries to buy stocks which are priced below his estimate of the company’s true worth and then holds them for the long term, regardless of short term volatility.

‘While past performance is no guide to the future, it is worth noting that in Nick’s hands this trust has produced sector-leading performance over the past decade and presumably he has learned something along the way.

‘The trust’s record has not gone unnoticed by the market but I still regard it as an attractive prospect.’

Simon Lambert, This is Money editor and author of the Minor Investor column highlights Lowland and Diverse Income trusts, as two that target both dividends and long-term growth.

Lowland investment trust

Ongoing charges: 0.59 per cent

Yield: 3.2 per cent

James Henderson, manager of the trust since 1990, holds more than 120 different companies but has a commitment not to invest more than half the trust into FTSE 100 companies. He argues that this approach of holding a large number of companies allowed him to target value and smaller company opportunities – and investing a small amount helps you buy earlier.

He is a contrarian value investor and looks for both undervalued opportunities and smaller companies that can deliver dividends and growth for years to come. This can lead to the trust underperforming the market in the short term, but in the long-term its record is very good.

Diverse Income Trust

Ongoing charges: 1.26 per cent

Yield: 2.8 per cent

Gervais Williams, of Diverse Income Trust, invests in smaller companies and has written a book extolling their virtues, The Future is Small.

He argues that small and micro cap shares have a huge opportunity to outperform lumbering large companies in a world where growth is slowing after the debt binge of the 2000s.

The dividend heroes

Every year, the Association of Investment Companies publishes its Dividend Heroes list. These are investment trusts with the longest history of raising their dividend payments year in-year-out.

Investment trusts are ideal for income investors as they are able to smooth dividend payments, keeping some money aside in the good years to cover any shortfall in the bad.

This is different to investment funds, which must pay out all their dividends. This list is from March 2016.

THE DIVIDEND HEROES INVESTMENT TRUST LEAGUE
Company	Sector	Number of consecutive years dividend increased
City of London Investment Trust	UK Equity Income	49
Bankers Investment Trust	Global	49
Alliance Trust	Global	49
Caledonia Investments	Global	48
F&C Global Smaller Companies	Global	45
Foreign & Colonial Investment Trust	Global	44
Brunner Investment Trust	Global	44
JPMorgan Claverhouse Investment Trust	UK Equity Income	43
Murray Income	UK Equity Income	42
Witan Investment Trust	Global	41
Scottish American	Global Equity Income	36
Merchants Trust	UK Equity Income	33
Scottish Investment Trust	Global	32
Scottish Mortgage Investment Trust	Global	32
Temple Bar	UK Equity Income	31
Value & Income	UK Equity Income	28
F&C Capital & Income	UK Equity Income	22
British & American	UK Equity Income	20
Schroder Income Growth	UK Equity Income	20
Source: AIC

Why invest through an Isa?

Investing with an Isa is one of the few opportunities we have for making money with very little tax but it doesn’t offer complete tax-free status.

Every year the Government gives us a tax-free Isa allowance.

Your Isa allowance for 2015/16 is £15,240 and will stay the same for the new tax year beginning 6 April 2016. You can move money from an investment Isa into a cash Isa or put your whole allowance in a cash Isa. This applies to any money you have invested in previous years.

Any gains within an Isa are free from capital gains tax. Everyone has a CGT allowance of £11,000 per year and many may feel they are unlikely to ever make more than this in profit each year from selling their assets.

However, those who invest consistently over time may one day be surprised at how much those investments are worth and holding them in a tax-free wrapper makes sense.

This is because if they opt to sell all or a large amount of their investments at one time and they are not held in an Isa, then they may be over the capital gains tax limit and face a tax bill. Whereas, hold them in an Isa and you have no such problem and will not even need to fill in a tax form if you sell.

Income from investments is also treated in a more tax-friendly way in an Isa. Corporate bonds and gilts income is tax-free.

Dividends and shares income are still taxed at 10 per cent before they are received, so basic-rate taxpayers will not gain any extra benefit, but higher-rate taxpayers do not have to pay any extra tax that would normally be incurred.

If you are a basic-rate taxpayer you may hope to be a higher-rate taxpayer one day, so putting your investments in a tax-free wrapper is a sound tactic. Investing through an Isa also removes the headache of filling in a tax return for both income and capital gains.

Dividend rules are changing at the start of the 2016/17 tax year on 6 April. A new dividend allowance will be introduced whereby the first £5,000 of dividend income earned each tax year will be tax-free. Until then, basic-rate taxpayers pay no tax on dividend income, while higher-rate taxpayers incur a 25 per cent charge and additional-rate payers have to fork out 30.56 on dividend income they receive.

Dividends received on shares held in Isas will continue to be tax free.

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