Category Archives: Personal Finance and making money.

Two-Thirds Of Brits Relying On Dream Cash Windfall To Clear Personal Debt

Posted on by

the compass of nowTwo-thirds of Britons are relying on a “dream” cash windfall to clear personal debt, new research shows.

One-in-three people believe they will land a major pay rise, win the lottery, make a fortune at the bookies, or inherit enough money to wipe the financial slate clean at some point in the future.

The majority freely admit that the likelihood of actually netting a large amount of cash unexpectedly is “improbable”.

But most continue to borrow or live beyond their means on the assumption that “the biggie”, when it comes in, will pay-off all outstanding loans, overdraft and credit card debt in one fell swoop.

Less than half of those in debt have sought professional advice about debt consolidation schemes or other repayment options, with the majority relying on non-qualified friends and family for guidance.

The poll of nearly 1,000 adults was conducted by the personal debt expert DDnard (corr), as part of an ongoing international study into borrowing behaviour.

DDnard, a Thai author whose self-help books on the subject have sold over 1.4million copies worldwide, describes those dreaming of a windfall as ‘flying ostriches’.

“It is clear that some borrowers either have their heads in the sand, or their heads in the clouds. Many do both,” she said.

“They either shy away from reality in the hope that it goes away, or they daydream about extraordinary ways in which it will be paid on their behalf.

“The sad fact is that, for most people at least, cash windfalls never materialise and those in debt must face the music and tackle the issue head-on. This is the only way to reduce personal debt and have a guaranteed debt-free future.”

Of the 921 adults questioned, 68 per cent said they were relying on an unexpected windfall. Of those, 19 per cent were hoping for a “major pay rise”, 13 per cent were counting on winning the lottery (13 per cent), and five percent were praying for a good streak at the races.

The majority were hoping for an inheritance (56 per cent), while seven per cent were reliant on the sale of their house of other valuable asset).

Less than a quarter (21 per cent) genuinely believed a windfall was probable, with 28 per cent and 51 per cent admitting it was either “possible” or “improbable” respectively.

Some 13 per cent said had not obtained professional advice because they were “unsure who to ask”, while the majority (48 per cent) seek financial advice from friends or family.

Only 39 per cent of those who were “struggling” with unsecured debt had sought professional advice from a bank or third party expert.

Food, school clothing, utility bills and other basic necessities accounted for 38 per cent of respondents’ debt.

But the remainder went into the red by purchasing “non-essentials” like expensive presents and home improvements, and by buying “extravagances” such as new cars and family holidays.

In total, 59 per cent admitted they could improve the way they handle money to avoid debt in the future. Almost the same number (41 per cent) said the cost of living is so high that personal debt is “all but unavoidable from time to time”.

The straw poll found that the overwhelming majority (56 per cent) of respondents blamed the ease at which they could obtain additional credit cards, transfer money to pay their balances, overdrafts and loans had contributed to the problem.

Others blamed the pressure of living in a “must-have” consumerist environment (16 per cent), the “buy now, worry later” mentality of peers or family (19 per cent), the desire to “live like a celebrity” (six per cent), and even the belief that buying things “made me happy” (three per cent).

Author and personal finance expert DDNard clawed her way back from a £2million debt following the unexpected death of her husband, a diamond magnate.

The self-help guru, whose new book The Compass of Now has just been released in the UK, said overcoming a mountain of debt isn’t easy, but that can be achieved by taking “one small step at a time”.

“This generally begins by accepting that you have a problem, or that one looks set to arise,” she said. “Once you are able to fully acknowledge a potentially problematic situation, you are better prepared to go about reversing it.

“The golden rule with debt, however small or large it might be, is not to bury your head in the sand and rely on a miracle – or a million-pound cash windfall. Seek expert advice and take matters into your own capable hands.”

The Compass of Now by DDnard (Life Compass Co., Ltd.) is available now.

Bestseller Enables Those In Financial Or Emotional Debt To Turn Life Around

Posted on by

 By 27, she owed £2million.


By 29, she was debt-free.

 

By 35, she was worth £4million.

 

The Compass of Now  follows one woman’s incredible journey from destitute widow to one of the world’s most powerful entrepreneurs and inspirational leaders.

 

the compass of nowIt documents, in moving detail, how she fought back from the brink of financial ruin just months after giving birth and then suddenly losing husband to a heart attack, and emerged emotionally stronger – and significantly richer – than she could have ever imagined.

 

But The Compass of Now is more than just an inspirational success story. It is the definitive guide to taking control of your finances – and your life. It’s step-by-step advice to financial and emotional freedom has already made the book a global phenomenon with more than 1.4million sales worldwide.

 

Author and self-help guru DDnard is the bestselling writer of all time in her native Thailand and one of the country’s most sought-after celebrities. She is now set to become a household name in Britain with the release of an English-language version of The Compass of Now, which hits the shelves for the first time this month.

 

This internationally-acclaimed title, released through Life Compass Publishing, merges the best of Eastern and Western world thinking, mindfulness and emotional healing techniques to reveal the practical, tried-and-tested steps that Brits – including the estimated 70 per cent in debt – can take in order to:

–          Manage and overcome personal debt

–          Become financially and emotionally free

–          Unleash their full potential and live life to the fullest

Speaking about the 216-page, full-colour paperback, DDnard, who lives in Bangpakong, Thailand, said: “This inspiring book is filled with the message of hope and personal strength, and will help you come to understand that your future truly is in your own hands.”

The Compass of Now by DDnard (Life Compass Co., Ltd.) is available now.

 

Investment Trusts by John Baron | Book Review

Posted on by

investmenttrustsWhen I first saw the title of this book, ‘Investment Trusts’. I thought that it would be quite a dry read. I was very wrong. This is a well written and easy to read guide to investment trusts. A must read for investors and financial advisers.

John Baron presents an extremely compelling case for investing in investment trusts instead of the more common and traditional unit trusts/ mutual funds.

As a very basic overview.

Unit trusts are open ended (except  funds from new investors) and trade at their net asset value

Investment trusts trade like shares on an exchange. They are closed ended (don’t accept new investor funds) and can trade at a discount or premium to their actual net asset values.

The book does a much better job of explaining the differences and goes into a lot more detail. Baron examines the factors which explain why unit trusts/OEICs under perform investment trusts. He clearly presents the opportunities which many investors may be missing out on.

The book is well researched (Baron has worked in the industry for many years). It is clear easy to understand, jargon free and well structured. It is difficult to argue with any of the authors conclusions. The book also has extra tips for successful investing and information on how to construct and monitor a trust portfolio. This is a must read for any investor who currently only invests in mutual funds. I’m not surprised it has a flawless record of 5 star reviews on Amazon.

5/5

Financial Times Guide to Investment Trusts: Unlocking the City’s Best Kept Secret is available here.

 

 

US Shutdown no cause for panic (yet)

Posted on by

The US Government has begun its first partial shutdown in 17 years, following congress’ failure to agree a budget to continue its funding.

 

The S&P 500 closed down 0.6%, whilst the US dollar fell against sterling last night, as investors digested the news.  The market’s reaction to the shutdown has been muted and suggests investors are expecting a resolution to these negotiations.

 

Adrian Lowcock, Senior investment Manager at Hargreaves Lansdown says;-“Investors have become used to political brinksmanship in the US with negotiations going to the wire but each time a resolution has been found.

These negotiations are the warm up act. The bigger issue, in around 17 days’ time, is negotiations to raise the $16.7trn US debt ceiling. Failure to raise the debt ceiling and allow the US government to continue borrowing could force the country into a default scenario which could then have more serious consequences for investors.

A US default is highly unlikely but political negotiations could create volatility in stock markets.

This doesn’t look like a selling trigger. Investors should focus on their long term goals and use any short term weakness as opportunities to invest.”

The 2011 Debt ceiling

In August 2011 a similar scenario played out.  The S&P 500 fell 19.74% from its peak in July 2011 as the S&P credit rating agency cut their top notch rating for the US and investors sold out. However by the end of the year the S&P had recovered and ended the year up 1.46%.

Chris Saint, Head of Currency Dealing, Hargreaves Lansdown “The US dollar extended its recent decline against the pound (lows of US$1.6261) after the deadline was missed. The fallout appears to have been limited by hopes that significant damage to the US economic recovery will be avoided, assuming a resolution can be agreed upon very soon.  In September we saw demand for US dollars rise 29% on the previous month.”

 

At the time of writing, the exchange rate stands at:

 

         Interbank rate                   % daily change

Sterling / US dollar                          1.6242                                           +0.37%


Royal Mail to float – what interested investors should do

Posted on by

The biggest privatisation for two decades

 

·         Royal Mail to float

·         What interested investors should do

·         IPO Q & A

Today the Government have announced plans to float the Royal Mail in what could be the largest privatisation for two decades. The state-owned postal service could be valued up to as much as £3 billion in an initial public offering (IPO) taking place this year.

 

Richard Hunter, Head of Equities, Hargreaves Lansdown;-

““The success of the Direct Line Group & esure share offers has reignited private investor interest in IPOs. The offer of shares to the public is reminiscent of the float of British Gas in the 1980’s which was accompanied by the “Tell Sid” Campaign. Shares will be marketed to the public and any investors aged over 18 will be able to apply for shares.

 

What interested investors should do

 

Richard Hunter

 

“We don’t have the details of the IPO yet. Investors can register their interest with a stockbroker now and when a prospectus and application pack becomes available they will contact you with all the information needed to invest.”

 

Tell Sid? – Investing in an Initial Public Offerings (IPOs) Q & A

 

From the first “Tell Sid” privatisation of British Gas in the 1980s, flotations and Initial Public Offerings (IPOs) have always been of interest to the investor. Richard Hunter, Head of Equities, explains how they work.

 

What is an IPO?

 

An Initial Public Offering (IPO) is where the owner(s) of a company sell all of part of their stake to the public in order to raise money. This cash can then be used to grow the company or simply be returned to the owners. An IPO is also commonly called a flotation.

 

An IPO may only be made available to institutional investors or to a mixture of private (retail) and institutional investors. An IPO happens in three stages.

 

1.            The Intention to Float – The company announces to the stock market, public stating they wish to float the company

2.            Preparation of Prospectus – The company will then prepare and release a prospectus. This aims to be the definitive document relating to the launch and will describe the offer in detail. Applications to buy shares in an IPO should always be made on the basis of the information contained in the prospectus

3.            Sale of shares – The company and their advisers invite applications for the shares. The IPO will be open for a fixed time known as the Offer Period

 

When will the share price be known?

 

In some cases fixed price offers are made and the investor will know the share price in advance. Alternatively the share price will not be known until the date the company floats. In some cases the company will provide an indicative range for the flotation price of the shares e.g. £2.00 to £2.20. The precise price won’t be fixed until near the listing date and may depend on demand for the shares. Once the share has floated on the open market, the price will the rise and fall as all other shares do.

 

Why would investor want to get buy shares at IPO?

 

An IPO allows investment in a company when it first enters a stock market.

 

When will shares go on sale?

 

The timetable for an IPO generally spans four weeks. An Intention to Float announcement is made and then around two weeks later the prospectus is issued and the offer period starts. It is during this period investors can apply for shares.

 

Where can investors get a prospectus for an IPO?

 

Interested investors should contact a stock broker who will be able to register your interest in receiving a prospectus. In some cases a stock broker will provide research and updates as information becomes available. For example, Hargreaves Lansdown has been involved in the majority of IPOs over the last 30 years.

 

How do investors buy IPO shares?

 

Investors can buy IPO shares through a stockbroker. A share dealing account should be opened and money deposited to buy the shares. This can be done online or over the telephone using a debit card, or alternatively a paper application accompanied by a cheque can be used.

 

How many shares can investors buy from an IPO?

 

There is normally a minimum number – If the offer is oversubscribed investors may not be able to buy all the shares they want to buy. If this is the case the balance of money can be used to buy other shares or can be refunded.

 

Can investors buy IPO shares through an ISA, SIPP or Junior ISA?

 

In some cases money in an ISA, SIPP or Junior ISA can be used to buy IPO shares. This depends upon which market the company is listing upon and the type of IPO.

 

What dealing costs are paid?

 

Buying IPO shares is often free for investors.

 

Hargreaves Lansdown’s charges are as follows:

 

IPO share purchase                         Free

Share account charge                     Nil (Other charges to hold shares may apply e.g. in ISA and SIPP (ISA – 0.5% capped at £45 a year, SIPP – 0.5% capped at £200 a year).

 

Selling IPO shares will be subject to a dealing charge from £5.95 and no more than £11.95 (online).

 

Buying IPO shares after the offer period, when the shares are available in the market, will be subject to a dealing fee of no more than £11.95 (online) plus stamp duty of 0.5%.

 

Is there a minimum holding period? How quick can an investor sell?

 

There is no minimum period, but generally it takes 3 working days from the date of the float to issue the shares and selling cannot practically happen before then.

 

How will investors be able to sell IPO shares?

 

This is easy. Simply choose when and how many to sell, and execute the deal online or alternatively instruct a sale over the telephone. Dealing online is almost always cheaper than dealing over the telephone.

 

Will there be a dividend from IPO shares and if so, how will they be paid and when?

 

This depends upon the company. The prospectus will normally detail any proposed dividend policy.

 

How will investors find out if there are any special discounts or shareholder perks?

 

If there are any, they will be detailed in the prospectus

 

What are the risks?

 

The value of shares will fall as well as rise, so investors may get back less than they invested. Dividends are not guaranteed and, if paid, are variable. During the period between the Intention to Float being announced and the start of the offer period, the intention may be withdrawn. This rarely happens.

A company which is the subject of an IPO may not have a long track record and could be difficult to value or calculate a fair price. In many IPOs investors do not know the share price before committing to buy and therefore may end up buying at a higher price than they wished.

Investors should read the prospectus and any supplementary documentation as this will include the main risks of investing.

 

The Collapse of Private Pensions

Posted on by

According to data published by the Office for National Statistics today, membership of private pensions (as opposed to the National Insurance funded state pension) has hit a new low; just 35% of men and 32% of women aged between 16 and 64 were active members of a private pension in 2011/12.

Membership of Defined Benefit pensions has declined from 46% of employees in 1997 to just 28% in 2012, almost exclusively now in the public sector.

Participation rates of employees varies dramatically between public and private sectors, with 85% of men and 81% of women in the public sector, compared to 36% and 26% respectively in the private sector.

Hargreaves Lansdown comment, Tom McPhail, Head of Pensions Research ‘These figures illustrate dramatically how important it is that auto-enrolment succeeds over the next 5 years. It is vital that nothing is done to jeopardise this project and that everything possible is done to encourage people to stay enrolled in their workplace pensions. Recent calls for reform of pension taxation or for small businesses to be exempt from auto-enrolment should be postponed or ignored until the foundations of a savings culture have been properly laid.’

Separately, the ONS has reported average contribution rates as 19.2% of payroll for Defined Benefits schemes and just 9.4% for Defined Contribution arrangements.

Tom McPhail: ‘The inevitable consequence of this level of pension funding is that millions of people will have to work on into their 70s because they won’t be able to afford to retire earlier. All defined contribution members should be shown what their contributions are likely to buy for them in the way of a retirement income, this pension projection should be updated regularly and members should be encouraged to engage with their retirement planning. 9.4% as an average is simply not enough. Investors should aim to be contributing at least 12% of their income towards their retirement. For a more personal estimate, they should use an online pension calculator.’

Many pension calculators are available on the internet, this is one example http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

What do you think? Do you have a pension?

Are Vouchers Now Cool?

Posted on by

Sienna-Miller05_glamour_1ju_592x888Saving money is important in today’s climate. While the recession grumbles on with only slight growth people are having to look around to find ways to have the same standard of living. It seems we are working harder for less and less. Understandably, our attitude to money is changing. When we work so hard for so little, or have no job at all, we all become more frugal with our cash, and who can blame us for being fussy about spending our hard earned money?

Back in the day vouchers used to be incredibly uncool. Cutting clippings out of newspapers to save 30 pence was not worth the embarrassment at that time. But times change and now vouchers are cool. The embarrassments is no longer there because thrift is in.

This is in part due to the recession. Interest rates are low, jobs are hard to come by or keep, wages are not rising but the cost of living is. Our finances are stretched like never before. This is why not only have vouchers become popular, but voucher websites have also become part of our culture. We can save money on clothes and make up, food and drink, but we can also save money on going out. You don’t have to be rich to live rich; you just have to be savvy.

There are a lot of options for finding vouchers. There are still many in traditional media like magazines and newspapers. However, Coupon websites such as voucherbox.co.uk are where it is at. They help people save money and still live despite the squeeze. It seems folly now to buy anything without one or even go out. I don’t know anyone who goes to Pizza Express without checking the internet for buy one get one free vouchers.  We never need to buy full price ever again.

What is your opinion? Do you use vouchers or coupons? Comment below.

 

 

US Independence Day – Should investors buy into the American Dream?

Posted on by

·         US valuations are at their long term average

·         US economy accounts for 19% of World GDP

·         HL analysis shows only 3 out of 77 large cap US funds beat their benchmark

Adrian Lowcock, Senior Investment Manager of Hargreaves Lansdown, looks at the prospects for the US economy on the eve of Independence Day;

“The US economy is much further down the road to recovery than the UK and Europe.  The banking system has been fixed and the country does not have the problems that still exist in Europe. We can see the light at the end of the tunnel in the US and sustainable growth may be achievable.

“Many US companies benefit from strong management teams, are profitable businesses and operate in an environment of improving growth.  Many American companies have a consistent and long term track record of being able to grow profits. In the world of uncertainty a premium is being attached to those businesses that can continue to grow.

“Whilst overall the US stockmarket is not cheap, there are still areas which offer value and investors get access to companies with huge growth potential.  The US has a long history of encouraging entrepreneurs to develop and grow business.  The US has a large smaller companies sector which is full of businesses looking to grow into global leaders. Investors should make sure they have some investment in the US Market within their portfolio.”

US Economy

The US Economy accounts for 19% or nearly 1/5th of the world’s gross domestic product.  Economic outlook in the US is improving with GDP growth forecast by the IMF at 1.9% for 2013 and 3% in 2014.  The threat of a “fiscal cliff” was largely delayed; bank lending conditions have improved from low levels.

 

Household debt as proportion of disposable income has fallen back to 2004 levels. House prices started to rise in 2012 and investment in residential property has followed.

 

Unemployment is falling with major banks* predicting the unemployment rate will be around 7% by the end of 2013.

 

Rising house prices should help rebuild household finances, as will improving employment, providing support to personal consumption.  Low borrowing rates should be supportive of increased spending, while businesses encouraged by the improving financial conditions and healthy profits may well increase investment.

 

Shale gas could be transformative for the US economy.  According to the U.S. Energy Information Administration it will keep market gas prices low at around $4 per million Btu until 2019 with prices rising slowly thereafter. This could rejuvenate the industrial sector.

 

Risks to US Recovery

 

The biggest risk is the early withdrawal of the Quantitative Easing programme.  As the economic data, such as unemployment falling below 7%, improves it puts pressure for the Federal Reserve to roll back on further QE. The US has not addressed its budget deficit and the US lacks a plan to reduce the debt. As such there are risks of further political entanglements over raising the debt ceiling, both of which result in a higher sovereign risk premium.

 

Investing in the US

 

The US stock market has performed well in recent years recovering from the financial crisis having returned 103% since March 2009 compared to the FTSE 100 and the FTSE Europe Ex UK returning 80% and 62% respectively. The US stock market is around its long term average valuation with a P/E at 21.98 compared to its long term average of 23.8 times earnings. Even so there are areas of the US Market that remain attractive.

 

The challenge for investors is how to access the US market. Analysis by Hargreaves Lansdown shows that large cap active managers continue to struggle in the region with only 3 out of 77 funds in the IMA North American sector out-performing the S&P 500 over 3 years and 6 out 68 able to do so over a 5 five year period.

 

Investors looking for large cap exposure should consider US tracker funds, , such as HBSC American Index or I-Shares S&P 500, to give access to the world’s largest stock market whilst keeping fees low. For those wishing to access US smaller companies our preferred fund is Legg Mason US Smaller Companies.

 

* Bank of Tokyo-Mitsubishi, Barclays, Citigroup, Deutsche Bank and UBS