News/Events

Checking Investments [24th July 08]

As I commentated in one of my first articles on investment, if you are not 100% happy in making that investment, whatever it is, then don’t do it. If you do, I can almost guarantee something will go wrong and you will not at all pleased somewhere along the line.

This may be totally true at present with the UK and many global markets having fallen in value and many feel they could fall further. But it is extremely tricky nigh impossible trying to determine the bottom of a market and when is the right time to buy.

Regrettable, many people buy when the markets are good and mainly when they are riding high and sell when they are bad, that is, when they are low. This is, of course, the reverse of what should be done and if you were happy to buy into, say, into the UK market with the FTSE at 6300, why shouldn’t you buy in with it at around 5200 as it is a discount of 18%?

There are many other mistakes investors make which could be helped if only they were prepared to have a regular review or seek advice from a qualified IFA. Over 2 or 3 years a well balanced portfolio can soon become unbalanced or maybe ‘flavour of the month’ funds had been purchased and these have now fallen from grace. One IFA carries out a regular review of all unit trusts, called the ‘Dog Fund Lists’, which highlights the consistent poor performance of certain funds and in there are surprisingly some very well known Investment Houses.

Some Investors should be more careful and perhaps avoid some of the following mistakes

• Always have sufficient cash as an emergency fund plus a bit more

• Do not take excessive risks to try and get a greater return

• Clear your debts before you invest

• Generally, avoid an Insurance Company’s managed fund as many have consistent below average past performance

• Review all with profit bonds even if there is an exit charge

• Many couples hold their assets the wrong way and pay unnecessary tax so reconsider how bank, building society and dividend yielding investments are held

I do come across many clients who have bought investments off the page or through a variety of different parties which takes away the benefit of having a specific investment strategy. They tend to be chasing performance as they have been lulled into the purchase from some high past returns and then end up placing all ‘their eggs in one basket’ by going for Gold, Natural Resources or maybe a Latin American Fund. All will have done extremely well over the last year but it can’t last forever and they can fall as rapidly as they grew. Taking a good profit is not a bad thing as knowing when to sell is even more difficult as there usually is some form of greed element.

I have extolled the virtues of a WRAP or investment supermarkets as these allow for the vast majority of your investments to be held in one place and I still firmly believe this is the way forward. The value of your portfolio can be calculated at the press of a button whilst purchases and sales can be made on line. One of our clients recently moved all their investments including pensions, ISAs, shares, investment trusts and general investments onto our WRAP totalling over a £1m and was pleased to find some plans that had been forgotten but more so that the endless stream of paper though their letterbox has nearly finished. They can now get an up to date valuation at any time of everything but there was one drawback as they had to go out and purchase a computer!

We are without doubt in tricky times especially if you are a more recent investor but you must look long term and make sure your own house is in order and have a regular review with your IFA. This is a promotion on behalf of Langtons IFA Ltd.

This article was written by Langtons - Published in the Western Morning News, Money, 24th July 2008