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Monday, August 24, 2015

Holding your nerve

"If you can make one heap of all your winnings 
And risk it on one turn of pitch-and-toss, 
And lose, and start again at your beginnings 
And never breathe a word about your loss; 
If you can force your heart and nerve and sinew 
To serve your turn long after they are gone, 
And so hold on when there is nothing in you 
Except the Will which says to them: 'Hold on!'"
                                         Rudyard Kipling, IF

The markets have not reacted well to China's recent tumbles. So far, for eight consecutive days, the UK stock market has fallen.

According to Hargreaves Lansdown, the FTSE All share has fallen by 7 per cent since last Monday (10th August), which equates to around £160bn wiped off the value of UK-listed companies.

Alastair McCaig, Market Analyst at online trader IG, has called it a blood bath. He said: "The collapse in Asian markets has triggered a sea of red on European equity markets as bears dominate the day’s trading.

"Shanghai wipes out 2015 gains; Asian panic scares off the bulls; and traders’ screens are drenched in a sea of red."

FTSE 100 as at 24 August. Source: Interactive Data/Hargreaves Lansdown

Brokers and traders may well be worried. I am not. True, my Isa is down £199. My largest holding - a global, dividend-paying portfolio, has been a disappointment after a year of fairly good returns. Obviously my Gold fund has gone down (I never expected it to provide a return - it is my 'insurance' mechanism). Also sadly my investment in an investment trust that had outperformed for 25 years has had a dismal 18 months.

These three things have really taken a battering from the #GreatFallofChina over the past few weeks. Consequently, this is the first time since I set up my S&S Isa two years ago that it dipped into negative territory.

The only stunners are Woodford's investment trust, Saga shares, my US investment index tracker and the Alliance Trust Sustainable Future Global Growth fund, an ethical fund which has not had a single bad week since I bought it over a year ago. 

Interestingly Saga had such a bad year I almost ditched it, but I held my nerve. Pension Freedoms are here, I thought. Saga will benefit from these. Well that was my perception. It proved wisdom.

I was also laughed at by some colleagues for considering investing in TSB before it listed. 'My broker says the shares will be no good', one said. But I perceived a market of investors keen on a new entrant into the banking market. So I bought them and made double my money on them when I sold them a few months after the launch. He wasn't laughing then. In fact, my tiny Isa has outperformed his at every level - and yet people trust men's financial opinions more than they trust mermaids. Odd, that. 

Two years ago I sold out of a China investment trust simply because I read that the country's growth estimates had fallen from 10 per cent to 7.5 per cent and then to 7 per cent. There was so much positive noise from the market about China despite this that I got worried. You don't see downward GDP revisions without some knock-on effects down the line. So I ignored the hype and I bought into the US market because it was a) depressed and everyone was saying it was not the place to be and b) as far as I am concerned, it is the most mature economy with some solid, cash-rich companies. I also understand the US stock market more than I understand how the Chinese stock market works.

My investing decisions are as scientific as that. I read everything I can, everything that comes my way, I think around it and I act. So far, this has proved to be a wise move. So I am not worried by this latest hiccup. I am disappointed but not scared. 

Here's why the latest tumble is keeping this mermaid pretty sanguine:

1) I am young (ish). My Isa was only designed to provide a bit extra in the event of having surprise quadruplets; failing that, I'm saving it as a bulwark for my pension. I am not set to retire for 30 years and a lot can happen in that time. I am not going to buy and sell on the turn of a market. I will sell when I need the money, and when I'm in the black, not the red. I also have to be in the black enough to cover the trading costs and make money. So why would I sell now? 

2) Things always go in cycles. I've seen two cycles in China in my working life. Now it looks like Brazil is the next BRIC to go down. So I avoid fads - these wheels turn more quickly than slow grinders like the UK or the US. I like my big slow old American industrial-sized wheels. 

3) Use Gold wisely. I don't keep it to make money. I keep it as an insurance against the direction of the US dollar/US stock market. So why would I sell it at a loss when I am using it as a hedge? 

4) Ethical funds. Nobody likes them. Everybody mocks them. So I bought one to see if it would indeed perform differently to the rest of the market. It did. I suspect I am a little contrarian around the edges. 

That said, my stocks and shares Isa is very small. It is not my main source of income, it's not something I would dip into for a rainy day. I have a very long-term plan for a long-term goal and I am not about to have my future finances shaped by short-term decisions and knee-jerk reactions. Markets cannot spook me. Of course, having surprise quadruplets would shake me immensely. But I think that's a story for another day.

Monday, August 17, 2015

Students - are you financially ready?

Many of my friends' children and the young people in my youth group have received their A-level results this summer.

They have all gotten into the Uni or College of their choice - congratulations guys! 

However although they are relishing the prospect of no longer having a bed time or having to eat their greens, little do they know that with adulthood comes responsibility - for their money, their belongings and their financial wellbeing.

Oh yes, lads and laddesses. Your bank account is now your domain, and yours alone. So consider your savings, and protecting your lovely, shiny new belongings. 

A study from Sainsbury's Bank has revealed that students own approximately £3000 worth of possessions in their university accommodation. This makes you a prime target for thieves in some areas, or a disaster waiting to happen.

To wit: in 1995, we watched from an open window in a mate's house, as my mate was on the phone to an ambivalent police force, some students moving into a house just up the road. There was a red van parked around the corner, and as soon as the students were moving in with their enormous boxy TVs and laptops the size of a small car, thieves were running in behind them through the open front door, and taking their belongings into the red van.

Also in 1995, Andre the French Dude's room was turned completely upside-down, and all his belongings were covered in papier mache. I may or may not have had a hand in this. These were the heady days of Tetley Hall in Headingley. Ah.... memories. Anyway the redecoration also included his massive Enigma-style computer, which never completely recovered, nor could the disk drive forgive and forget.

Stolen from Bryony's webpage, her room (note the bottles... ahem)
For a view of one of the rooms, my friend the Rev Bryony Taylor took this pic (left) of her room at Tetley Hall back in the 1990s. Yes, it was before digital cameras were invented, yes I'm old. Get over it ... 

Nowadays there are a lot more electrical items sitting in student accommodation, and a whopping third of students say their possessions aren’t covered by home insurance.

According to Sainsbury's Home Insurance, only 10% of students living away from home have cover on their parents’ home insurance policy.

With 92% of students owning laptops and smartphones, this could be a costly item to replace if there is no appropriate cover. Furthermore, the vast majority (85% of students) say they have a physical collection of books; and the typical value of a student’s bookshelf is now £181.

SO, students - before I write a post about great ways to save for a fun three-four years at uni, please please make sure your parents have checked their home insurance policy to see if Uni accommodation and halls of residence are covered.

If not, conveniently, many providers, including Sainsbury’s Bank, offer protection for student home contents as part of its regular home insurance cover.

ItemPercentage of students who own thisAverage value
Stereo/music system & speakers / headphones
iPad or other tablet
iPod or similar
Sports equipment
Games console
Electronic items - other
Musical instrument e.g guitar
Mobile phone (other)
Desktop PC
Source: Sainsbury's Bank

Protect Baby Boomers

Baby boomers have it all, don't they? Gold-plated DB pensions, no mortgages, second properties even in some cases. They have cash in the bank and nice things at home. Or so you would think. But in fact, financial crime has been rising among this Boom set - in the form of stealing from their own parents and elderly relatives.

Shocking, no? But research from accountancy KPMG has found that crown court cases relating to fraud against family members rose to £2.1m in the first half of this year, up from £400,000 the previous June.

A massive 80 percent of this was against the over 65s, with the majority of this being carried out against the very elderly by their own baby-boomer children and relatives.

In one case, a woman approaching her 60s stole her own father's care home fees after being granted power of attorney. Another man stole his frail mother's £600,000 savings because he was not going to be the main recipient in her will.

True the credit crunch has affected a lot of people. Baby boomers are having to support children and in some cases, grandchildren because of school and university fees, redundancies and an ever-rising deposit needed to get onto the housing ladder.

But this is no excuse for theft, theft from the very people who went without themselves in order that their children, born at the tail end of WW2, might have a better chance in life. Such shameful behaviour must be brought to light and more support must be given to people in their later years, to protect them and their finances from predators.