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shed some light.
ARE BONDS A GOOD INVESTMENT IN 2021? Bonds are a good investment mainly because they’re a shock absorber that can stop you hitting the panic button. We all know that equity declines can inflict savage losses on a portfolio. The UK stock market fell 72% from 1972 to 1974. Some 57% was wiped off US stocks from 2007to 2009.
PAY OFF THE MORTGAGE OR INVEST? W hen interest rates are high or rising, a tricky question for private investors comes to the fore: “Should I pay off my mortgage or invest?”. Most of the time, paying off the mortgage is a compelling option.But low mortgage rates such as we saw in 2009 and 2010 – coupled with the stock market buying opportunity of a lifetime – turned conventional wisdom on its head. INVEST IN ANTIQUE FURNITURE One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture. According to this antique blog entry from 2008: Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 a ‘dramatic IS IT SAFE TO INVEST IN CORPORATE BONDS? A lot of people arrive at this site after asking Google: Is it safe to invest in corporate bonds?. It’s a reasonable question, yet the answer is complicated. Many people are confused about what a ‘bond’ is, with good reason given how freely the financial services industry throws the word about. LIFE EXPECTANCY FOR COUPLES: WHY IT'S SURPRISINGLY LONG The chance that at least one of our pair will be alive in 50 years: 2.5% + 22.5% + 7.5% = 32.5%. Check out more investing maths fun with Monevator! Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. BLACKROCK MYMAP FUND-OF-FUNDS BlackRock – the fund giant behind the popular iShares ETFs – has come along with an investing magic wand in the shape of its new MyMap range of funds – here to solve your asset allocation worries. Each MyMap fund is an off-the-shelf solution known as a fund-of-funds. Essentially it’s a hamper full of index trackers that amount to a SHOULD YOU INVEST IN A BUY-TO-LET PROPERTY THROUGH A Buy-to-let used to be so easy, as Simon Lambert noted back in 2015: 1,000 invested into buy-to-let in 1996 would be worth £14,900 at the end of 2014. It comfortably beat all other assets. The same 1,000 invested in shares would be worth £3,119, while a HOW THE BID-OFFER SPREAD INFLATES YOUR ETF COSTS The bid price (i.e. the highest price I can sell for) = 99p. The offer price (i.e. the lowest price at which I can buy) = 101p. The bid-offer spread = 2p per share (or 1.98%) The bid-offer spread therefore costs me 1.98% from the moment I buy into the MUG ETF, on MONEVATOR - MAKE MORE MONEY, INVEST PROFITABLY, RETIRE EARLYTOOLSCONTACTARCHIVESBEST OFABOUTFOLLOW Living in a commuter town somewhere in middle England. Home is a three-bedroom, 720 square foot, house worth £249,000. £96,000 remains outstanding on the mortgage. Their pensions, investments, savings, cars, and other possessions are worth a combined £133,600. Giving them a total net worth of £286,600. BEST GLOBAL TRACKER FUNDS T he only equity allocation you really need is a global tracker fund, as ex-hedge fund manager Lars Kroijer has previously explained on Monevator.. It sounds almost too simple. But how do you choose the best global tracker fund from all the options? This updated guide willshed some light.
ARE BONDS A GOOD INVESTMENT IN 2021? Bonds are a good investment mainly because they’re a shock absorber that can stop you hitting the panic button. We all know that equity declines can inflict savage losses on a portfolio. The UK stock market fell 72% from 1972 to 1974. Some 57% was wiped off US stocks from 2007to 2009.
PAY OFF THE MORTGAGE OR INVEST? W hen interest rates are high or rising, a tricky question for private investors comes to the fore: “Should I pay off my mortgage or invest?”. Most of the time, paying off the mortgage is a compelling option.But low mortgage rates such as we saw in 2009 and 2010 – coupled with the stock market buying opportunity of a lifetime – turned conventional wisdom on its head. INVEST IN ANTIQUE FURNITURE One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture. According to this antique blog entry from 2008: Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 a ‘dramatic IS IT SAFE TO INVEST IN CORPORATE BONDS? A lot of people arrive at this site after asking Google: Is it safe to invest in corporate bonds?. It’s a reasonable question, yet the answer is complicated. Many people are confused about what a ‘bond’ is, with good reason given how freely the financial services industry throws the word about. LIFE EXPECTANCY FOR COUPLES: WHY IT'S SURPRISINGLY LONG The chance that at least one of our pair will be alive in 50 years: 2.5% + 22.5% + 7.5% = 32.5%. Check out more investing maths fun with Monevator! Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. BLACKROCK MYMAP FUND-OF-FUNDS BlackRock – the fund giant behind the popular iShares ETFs – has come along with an investing magic wand in the shape of its new MyMap range of funds – here to solve your asset allocation worries. Each MyMap fund is an off-the-shelf solution known as a fund-of-funds. Essentially it’s a hamper full of index trackers that amount to a SHOULD YOU INVEST IN A BUY-TO-LET PROPERTY THROUGH A Buy-to-let used to be so easy, as Simon Lambert noted back in 2015: 1,000 invested into buy-to-let in 1996 would be worth £14,900 at the end of 2014. It comfortably beat all other assets. The same 1,000 invested in shares would be worth £3,119, while a HOW THE BID-OFFER SPREAD INFLATES YOUR ETF COSTS The bid price (i.e. the highest price I can sell for) = 99p. The offer price (i.e. the lowest price at which I can buy) = 101p. The bid-offer spread = 2p per share (or 1.98%) The bid-offer spread therefore costs me 1.98% from the moment I buy into the MUG ETF, on HOW TO MANAGE MULTIPLE PORTFOLIOS 1 day ago · M any in the Monevator community ask about how to manage multiple portfolios, especially as part of a single family household.. Reader Sunil sums up the dilemma: I understand the importance of diversification, but what about across multiple portfolios? I have a HOW MUCH WILL YOU LOSE IF BOND PRICES FALL? (AND WHAT IF Bonus appendix: Bond funds, duration and bond price calculators. It’s simplest to use duration as an approximate guide to your bond fund’s prospects when its market interest rate changes. As a rule of thumb, a bond fund (or bond) with a duration of 7 will: Lose 7% for every 1% rise in its yield. Gain 7% for every 1% fall in yield. MANAGING AN INVESTMENT PORTFOLIO: HOW TO KEEP IT ON TRACK T his post is for anyone who wants to manage their own investment portfolio and needs to know how to keep it running smoothly.I’m going to explain how to perform an annual check-up using industry best practice and ideas from some of the best investment educators in thebusiness.
FUND NAMES EXPLAINED S eeking index trackers in the investible universe can be about as rewarding for new investors as a SETI search for E.T.. You scan reams of data for friendly life-forms, only to discover you’re mostly surrounded by the dark matter of active funds. So here is a quick and simple post aimed at giving new passive investors the confidence to rapidly recognise legitimate index fund names and so HOW TO WORK OUT YOUR PORTFOLIO'S ACTUAL COST H ere’s a quick way of working out how much your entire portfolio costs to run at the fund level. Simply take each fund in your portfolio and Multiply the fund’s Ongoing Charge Figure (OCF) by the percentage of your portfolio that’s allocated to the fund.. This gives you the weighted OCF of each fund in your portfolio. Now add those numbers up to discover your portfolio’s total OCF. PENSION TRANSFERS: EVERYTHING YOU NEED TO KNOW In principle you can transfer your UK pension to another registered UK pension scheme in your name without breaking the rules and getting clobbered with a massive tax charge. In reality, the pension transfer rules vary between pension types and providers. The whole area is a minefield blanketed in a fog, mapped by Mr Muddle. WEEKEND READING: THE SCI-FI STOCK MARKET What caught my eye this week. T he sky above the port was the color of television, tuned to a dead channel.. So runs the first sentence of William Gibson’s Neuromancer, a book I first read as an 11-year-old and have judged technology against ever since.. As one of the first few thousand people in the UK to encounter the ‘World Wide Web’ in the very early 1990s, I half-saw Neuromancer CAN DOGS AND FINANCIAL INDEPENDENCE GO TOGETHER? This article exploring dogs and financial independence is by The Mr & Mrs from Team Monevator. Check back every Monday for more fresh perspectives on personal finance and MONEVATOR - PAGE 108 OF 433 - MAKE MORE MONEY, INVEST What caught my eye this week. I enjoyed a top floor view over the Thames this week at the book launch for the second edition of Lars Kroijer’s Investing Demystified.It was a pleasure too to meet his family including his young children, one of whom said she hadn’t read her father’s book because it was likely to be “gobbledygook”.. It’s commendable to be so skeptical at such atender
MANAGE SUBSCRIPTIONS You can follow the discussion on How to manage multiple portfolios without having to leave a comment. Cool, huh? Just enter your email address in the form here below and you’re all set. Email MONEVATOR - MAKE MORE MONEY, INVEST PROFITABLY, RETIRE EARLYTOOLSCONTACTARCHIVESBEST OFABOUTFOLLOW Living in a commuter town somewhere in middle England. Home is a three-bedroom, 720 square foot, house worth £249,000. £96,000 remains outstanding on the mortgage. Their pensions, investments, savings, cars, and other possessions are worth a combined £133,600. Giving them a total net worth of £286,600. BEST GLOBAL TRACKER FUNDS T he only equity allocation you really need is a global tracker fund, as ex-hedge fund manager Lars Kroijer has previously explained on Monevator.. It sounds almost too simple. But how do you choose the best global tracker fund from all the options? This updated guide willshed some light.
ARE BONDS A GOOD INVESTMENT IN 2021? Bonds are a good investment mainly because they’re a shock absorber that can stop you hitting the panic button. We all know that equity declines can inflict savage losses on a portfolio. The UK stock market fell 72% from 1972 to 1974. Some 57% was wiped off US stocks from 2007to 2009.
PAY OFF THE MORTGAGE OR INVEST? W hen interest rates are high or rising, a tricky question for private investors comes to the fore: “Should I pay off my mortgage or invest?”. Most of the time, paying off the mortgage is a compelling option.But low mortgage rates such as we saw in 2009 and 2010 – coupled with the stock market buying opportunity of a lifetime – turned conventional wisdom on its head. INVEST IN ANTIQUE FURNITURE One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture. According to this antique blog entry from 2008: Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 a ‘dramatic IS IT SAFE TO INVEST IN CORPORATE BONDS? A lot of people arrive at this site after asking Google: Is it safe to invest in corporate bonds?. It’s a reasonable question, yet the answer is complicated. Many people are confused about what a ‘bond’ is, with good reason given how freely the financial services industry throws the word about. LIFE EXPECTANCY FOR COUPLES: WHY IT'S SURPRISINGLY LONG The chance that at least one of our pair will be alive in 50 years: 2.5% + 22.5% + 7.5% = 32.5%. Check out more investing maths fun with Monevator! Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. BLACKROCK MYMAP FUND-OF-FUNDS BlackRock – the fund giant behind the popular iShares ETFs – has come along with an investing magic wand in the shape of its new MyMap range of funds – here to solve your asset allocation worries. Each MyMap fund is an off-the-shelf solution known as a fund-of-funds. Essentially it’s a hamper full of index trackers that amount to a SHOULD YOU INVEST IN A BUY-TO-LET PROPERTY THROUGH A Buy-to-let used to be so easy, as Simon Lambert noted back in 2015: 1,000 invested into buy-to-let in 1996 would be worth £14,900 at the end of 2014. It comfortably beat all other assets. The same 1,000 invested in shares would be worth £3,119, while a HOW THE BID-OFFER SPREAD INFLATES YOUR ETF COSTS The bid price (i.e. the highest price I can sell for) = 99p. The offer price (i.e. the lowest price at which I can buy) = 101p. The bid-offer spread = 2p per share (or 1.98%) The bid-offer spread therefore costs me 1.98% from the moment I buy into the MUG ETF, on MONEVATOR - MAKE MORE MONEY, INVEST PROFITABLY, RETIRE EARLYTOOLSCONTACTARCHIVESBEST OFABOUTFOLLOW Living in a commuter town somewhere in middle England. Home is a three-bedroom, 720 square foot, house worth £249,000. £96,000 remains outstanding on the mortgage. Their pensions, investments, savings, cars, and other possessions are worth a combined £133,600. Giving them a total net worth of £286,600. BEST GLOBAL TRACKER FUNDS T he only equity allocation you really need is a global tracker fund, as ex-hedge fund manager Lars Kroijer has previously explained on Monevator.. It sounds almost too simple. But how do you choose the best global tracker fund from all the options? This updated guide willshed some light.
ARE BONDS A GOOD INVESTMENT IN 2021? Bonds are a good investment mainly because they’re a shock absorber that can stop you hitting the panic button. We all know that equity declines can inflict savage losses on a portfolio. The UK stock market fell 72% from 1972 to 1974. Some 57% was wiped off US stocks from 2007to 2009.
PAY OFF THE MORTGAGE OR INVEST? W hen interest rates are high or rising, a tricky question for private investors comes to the fore: “Should I pay off my mortgage or invest?”. Most of the time, paying off the mortgage is a compelling option.But low mortgage rates such as we saw in 2009 and 2010 – coupled with the stock market buying opportunity of a lifetime – turned conventional wisdom on its head. INVEST IN ANTIQUE FURNITURE One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture. According to this antique blog entry from 2008: Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 a ‘dramatic IS IT SAFE TO INVEST IN CORPORATE BONDS? A lot of people arrive at this site after asking Google: Is it safe to invest in corporate bonds?. It’s a reasonable question, yet the answer is complicated. Many people are confused about what a ‘bond’ is, with good reason given how freely the financial services industry throws the word about. LIFE EXPECTANCY FOR COUPLES: WHY IT'S SURPRISINGLY LONG The chance that at least one of our pair will be alive in 50 years: 2.5% + 22.5% + 7.5% = 32.5%. Check out more investing maths fun with Monevator! Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. BLACKROCK MYMAP FUND-OF-FUNDS BlackRock – the fund giant behind the popular iShares ETFs – has come along with an investing magic wand in the shape of its new MyMap range of funds – here to solve your asset allocation worries. Each MyMap fund is an off-the-shelf solution known as a fund-of-funds. Essentially it’s a hamper full of index trackers that amount to a SHOULD YOU INVEST IN A BUY-TO-LET PROPERTY THROUGH A Buy-to-let used to be so easy, as Simon Lambert noted back in 2015: 1,000 invested into buy-to-let in 1996 would be worth £14,900 at the end of 2014. It comfortably beat all other assets. The same 1,000 invested in shares would be worth £3,119, while a HOW THE BID-OFFER SPREAD INFLATES YOUR ETF COSTS The bid price (i.e. the highest price I can sell for) = 99p. The offer price (i.e. the lowest price at which I can buy) = 101p. The bid-offer spread = 2p per share (or 1.98%) The bid-offer spread therefore costs me 1.98% from the moment I buy into the MUG ETF, on HOW TO MANAGE MULTIPLE PORTFOLIOS 1 day ago · M any in the Monevator community ask about how to manage multiple portfolios, especially as part of a single family household.. Reader Sunil sums up the dilemma: I understand the importance of diversification, but what about across multiple portfolios? I have a HOW MUCH WILL YOU LOSE IF BOND PRICES FALL? (AND WHAT IF Bonus appendix: Bond funds, duration and bond price calculators. It’s simplest to use duration as an approximate guide to your bond fund’s prospects when its market interest rate changes. As a rule of thumb, a bond fund (or bond) with a duration of 7 will: Lose 7% for every 1% rise in its yield. Gain 7% for every 1% fall in yield. FUND NAMES EXPLAINED S eeking index trackers in the investible universe can be about as rewarding for new investors as a SETI search for E.T.. You scan reams of data for friendly life-forms, only to discover you’re mostly surrounded by the dark matter of active funds. So here is a quick and simple post aimed at giving new passive investors the confidence to rapidly recognise legitimate index fund names and so MANAGING AN INVESTMENT PORTFOLIO: HOW TO KEEP IT ON TRACK T his post is for anyone who wants to manage their own investment portfolio and needs to know how to keep it running smoothly.I’m going to explain how to perform an annual check-up using industry best practice and ideas from some of the best investment educators in thebusiness.
HOW TO WORK OUT YOUR PORTFOLIO'S ACTUAL COST H ere’s a quick way of working out how much your entire portfolio costs to run at the fund level. Simply take each fund in your portfolio and Multiply the fund’s Ongoing Charge Figure (OCF) by the percentage of your portfolio that’s allocated to the fund.. This gives you the weighted OCF of each fund in your portfolio. Now add those numbers up to discover your portfolio’s total OCF. PENSION TRANSFERS: EVERYTHING YOU NEED TO KNOW In principle you can transfer your UK pension to another registered UK pension scheme in your name without breaking the rules and getting clobbered with a massive tax charge. In reality, the pension transfer rules vary between pension types and providers. The whole area is a minefield blanketed in a fog, mapped by Mr Muddle. WEEKEND READING: THE SCI-FI STOCK MARKET What caught my eye this week. T he sky above the port was the color of television, tuned to a dead channel.. So runs the first sentence of William Gibson’s Neuromancer, a book I first read as an 11-year-old and have judged technology against ever since.. As one of the first few thousand people in the UK to encounter the ‘World Wide Web’ in the very early 1990s, I half-saw Neuromancer CAN DOGS AND FINANCIAL INDEPENDENCE GO TOGETHER? This article exploring dogs and financial independence is by The Mr & Mrs from Team Monevator. Check back every Monday for more fresh perspectives on personal finance and MONEVATOR - PAGE 108 OF 433 - MAKE MORE MONEY, INVEST What caught my eye this week. I enjoyed a top floor view over the Thames this week at the book launch for the second edition of Lars Kroijer’s Investing Demystified.It was a pleasure too to meet his family including his young children, one of whom said she hadn’t read her father’s book because it was likely to be “gobbledygook”.. It’s commendable to be so skeptical at such atender
MANAGE SUBSCRIPTIONS You can follow the discussion on How to manage multiple portfolios without having to leave a comment. Cool, huh? Just enter your email address in the form here below and you’re all set. Email MONEVATOR - MAKE MORE MONEY, INVEST PROFITABLY, RETIRE EARLYTOOLSCONTACTARCHIVESBEST OFABOUTFOLLOW Living in a commuter town somewhere in middle England. Home is a three-bedroom, 720 square foot, house worth £249,000. £96,000 remains outstanding on the mortgage. Their pensions, investments, savings, cars, and other possessions are worth a combined £133,600. Giving them a total net worth of £286,600. BEST GLOBAL TRACKER FUNDS T he only equity allocation you really need is a global tracker fund, as ex-hedge fund manager Lars Kroijer has previously explained on Monevator.. It sounds almost too simple. But how do you choose the best global tracker fund from all the options? This updated guide willshed some light.
PROS AND CONS OF BEING WEALTHY Y ou want to be rich. Perhaps you plan to be very wealthy indeed. Who wouldn’t? Talking about the pros and cons of being wealthy seems as one-sided as a boxing match between Warren Buffett and Muhammad Ali.. However I’ve been giving this some thought – inspired by my strange and unfounded fear of winning £56 million pounds in the lottery – and there are quite a few bad points. WHAT YOU NEED TO KNOW ABOUT NOMINEE ACCOUNTS A nominee company is a custodian charged with the safekeeping of investors’ securities. It should be a separate entity from the broker itself. Your investments are held for you – on trust – in a nominee account. This means that while the nominee is the legal owner of the securities, you retain actual ownership as the beneficiary. INVEST IN ANTIQUE FURNITURE One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture. According to this antique blog entry from 2008: Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 a ‘dramatic PAY OFF THE MORTGAGE OR INVEST? W hen interest rates are high or rising, a tricky question for private investors comes to the fore: “Should I pay off my mortgage or invest?”. Most of the time, paying off the mortgage is a compelling option.But low mortgage rates such as we saw in 2009 and 2010 – coupled with the stock market buying opportunity of a lifetime – turned conventional wisdom on its head. SALARY SACRIFICE: THE DOWNSIDES IN A CRISIS Salary sacrifice schemes are a contractual agreement between you and your employer to give up part of your salary in exchange for a non-cash benefit such as pension contributions, childcare support, bicycles, and ultra-low emission cars. The upside is you do not pay tax or National Insurance Contributions (NICs) on your foregonesalary.
IS IT SAFE TO INVEST IN CORPORATE BONDS? A lot of people arrive at this site after asking Google: Is it safe to invest in corporate bonds?. It’s a reasonable question, yet the answer is complicated. Many people are confused about what a ‘bond’ is, with good reason given how freely the financial services industry throws the word about. HOW THE BID-OFFER SPREAD INFLATES YOUR ETF COSTS The bid price (i.e. the highest price I can sell for) = 99p. The offer price (i.e. the lowest price at which I can buy) = 101p. The bid-offer spread = 2p per share (or 1.98%) The bid-offer spread therefore costs me 1.98% from the moment I buy into the MUG ETF, on LIFE EXPECTANCY FOR COUPLES: WHY IT'S SURPRISINGLY LONGLIFE EXPECTANCYAT 66
The chance that at least one of our pair will be alive in 50 years: 2.5% + 22.5% + 7.5% = 32.5%. Check out more investing maths fun with Monevator! Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. MONEVATOR - MAKE MORE MONEY, INVEST PROFITABLY, RETIRE EARLYTOOLSCONTACTARCHIVESBEST OFABOUTFOLLOW Living in a commuter town somewhere in middle England. Home is a three-bedroom, 720 square foot, house worth £249,000. £96,000 remains outstanding on the mortgage. Their pensions, investments, savings, cars, and other possessions are worth a combined £133,600. Giving them a total net worth of £286,600. BEST GLOBAL TRACKER FUNDS T he only equity allocation you really need is a global tracker fund, as ex-hedge fund manager Lars Kroijer has previously explained on Monevator.. It sounds almost too simple. But how do you choose the best global tracker fund from all the options? This updated guide willshed some light.
PROS AND CONS OF BEING WEALTHY Y ou want to be rich. Perhaps you plan to be very wealthy indeed. Who wouldn’t? Talking about the pros and cons of being wealthy seems as one-sided as a boxing match between Warren Buffett and Muhammad Ali.. However I’ve been giving this some thought – inspired by my strange and unfounded fear of winning £56 million pounds in the lottery – and there are quite a few bad points. WHAT YOU NEED TO KNOW ABOUT NOMINEE ACCOUNTS A nominee company is a custodian charged with the safekeeping of investors’ securities. It should be a separate entity from the broker itself. Your investments are held for you – on trust – in a nominee account. This means that while the nominee is the legal owner of the securities, you retain actual ownership as the beneficiary. INVEST IN ANTIQUE FURNITURE One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture. According to this antique blog entry from 2008: Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 a ‘dramatic PAY OFF THE MORTGAGE OR INVEST? W hen interest rates are high or rising, a tricky question for private investors comes to the fore: “Should I pay off my mortgage or invest?”. Most of the time, paying off the mortgage is a compelling option.But low mortgage rates such as we saw in 2009 and 2010 – coupled with the stock market buying opportunity of a lifetime – turned conventional wisdom on its head. SALARY SACRIFICE: THE DOWNSIDES IN A CRISIS Salary sacrifice schemes are a contractual agreement between you and your employer to give up part of your salary in exchange for a non-cash benefit such as pension contributions, childcare support, bicycles, and ultra-low emission cars. The upside is you do not pay tax or National Insurance Contributions (NICs) on your foregonesalary.
IS IT SAFE TO INVEST IN CORPORATE BONDS? A lot of people arrive at this site after asking Google: Is it safe to invest in corporate bonds?. It’s a reasonable question, yet the answer is complicated. Many people are confused about what a ‘bond’ is, with good reason given how freely the financial services industry throws the word about. HOW THE BID-OFFER SPREAD INFLATES YOUR ETF COSTS The bid price (i.e. the highest price I can sell for) = 99p. The offer price (i.e. the lowest price at which I can buy) = 101p. The bid-offer spread = 2p per share (or 1.98%) The bid-offer spread therefore costs me 1.98% from the moment I buy into the MUG ETF, on LIFE EXPECTANCY FOR COUPLES: WHY IT'S SURPRISINGLY LONGLIFE EXPECTANCYAT 66
The chance that at least one of our pair will be alive in 50 years: 2.5% + 22.5% + 7.5% = 32.5%. Check out more investing maths fun with Monevator! Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. HOW TO MANAGE MULTIPLE PORTFOLIOS 4 hours ago · M any in the Monevator community ask about how to manage multiple portfolios, especially as part of a single family household.. Reader Sunil sums up the dilemma: I understand the importance of diversification, but what about across multiple portfolios? I have a SIPP and ISA, and run a SIPP and ISA for my wife. LOW-COST INDEX TRACKERS THAT WILL SAVE YOU MONEY This is our September 2020 update of the cheapest index trackers for British investors.If you’ve checked out this page before then know the main action this time is in the gold, UK gilts, total global bond, developed world, and emerging market equity categories. HOW MUCH WILL YOU LOSE IF BOND PRICES FALL? (AND WHAT IF Bonus appendix: Bond funds, duration and bond price calculators. It’s simplest to use duration as an approximate guide to your bond fund’s prospects when its market interest rate changes. As a rule of thumb, a bond fund (or bond) with a duration of 7 will: Lose 7% for every 1% rise in its yield. Gain 7% for every 1% fall in yield. COMPARE THE BROKERS AND SAVE MONEY Compare the brokers and save money. W ant to choose your own shares, ETFs, and funds? This tool compares over 20 providers and shows you the fees you’ll pay. Switching provider could save you thousands of pounds in just a few years. The tool makes some assumptions to compare the platforms, which may not match your situation. MANAGING AN INVESTMENT PORTFOLIO: HOW TO KEEP IT ON TRACK T his post is for anyone who wants to manage their own investment portfolio and needs to know how to keep it running smoothly.I’m going to explain how to perform an annual check-up using industry best practice and ideas from some of the best investment educators in thebusiness.
WHAT YOU NEED TO KNOW ABOUT NOMINEE ACCOUNTS A nominee company is a custodian charged with the safekeeping of investors’ securities. It should be a separate entity from the broker itself. Your investments are held for you – on trust – in a nominee account. This means that while the nominee is the legal owner of the securities, you retain actual ownership as the beneficiary. PROS AND CONS OF BEING WEALTHY Y ou want to be rich. Perhaps you plan to be very wealthy indeed. Who wouldn’t? Talking about the pros and cons of being wealthy seems as one-sided as a boxing match between Warren Buffett and Muhammad Ali.. However I’ve been giving this some thought – inspired by my strange and unfounded fear of winning £56 million pounds in the lottery – and there are quite a few bad points. WEEKEND READING: THE SCI-FI STOCK MARKET What caught my eye this week. T he sky above the port was the color of television, tuned to a dead channel.. So runs the first sentence of William Gibson’s Neuromancer, a book I first read as an 11-year-old and have judged technology against ever since.. As one of the first few thousand people in the UK to encounter the ‘World Wide Web’ in the very early 1990s, I half-saw Neuromancer CAN DOGS AND FINANCIAL INDEPENDENCE GO TOGETHER? 1 day ago · This article exploring dogs and financial independence is by The Mr & Mrs from Team Monevator. Check back every Monday for more fresh perspectives on personal finance and MANAGE SUBSCRIPTIONS You can follow the discussion on How to manage multiple portfolios without having to leave a comment. Cool, huh? Just enter your email address in the form here below and you’re all set. Email MONEVATOR - MAKE MORE MONEY, INVEST PROFITABLY, RETIRE EARLYTOOLSCONTACTARCHIVESBEST OFABOUTFOLLOW Living in a commuter town somewhere in middle England. Home is a three-bedroom, 720 square foot, house worth £249,000. £96,000 remains outstanding on the mortgage. Their pensions, investments, savings, cars, and other possessions are worth a combined £133,600. Giving them a total net worth of £286,600. BEST GLOBAL TRACKER FUNDS T he only equity allocation you really need is a global tracker fund, as ex-hedge fund manager Lars Kroijer has previously explained on Monevator.. It sounds almost too simple. But how do you choose the best global tracker fund from all the options? This updated guide willshed some light.
PROS AND CONS OF BEING WEALTHY Y ou want to be rich. Perhaps you plan to be very wealthy indeed. Who wouldn’t? Talking about the pros and cons of being wealthy seems as one-sided as a boxing match between Warren Buffett and Muhammad Ali.. However I’ve been giving this some thought – inspired by my strange and unfounded fear of winning £56 million pounds in the lottery – and there are quite a few bad points. WHAT YOU NEED TO KNOW ABOUT NOMINEE ACCOUNTS A nominee company is a custodian charged with the safekeeping of investors’ securities. It should be a separate entity from the broker itself. Your investments are held for you – on trust – in a nominee account. This means that while the nominee is the legal owner of the securities, you retain actual ownership as the beneficiary. INVEST IN ANTIQUE FURNITURE One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture. According to this antique blog entry from 2008: Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 a ‘dramatic PAY OFF THE MORTGAGE OR INVEST? W hen interest rates are high or rising, a tricky question for private investors comes to the fore: “Should I pay off my mortgage or invest?”. Most of the time, paying off the mortgage is a compelling option.But low mortgage rates such as we saw in 2009 and 2010 – coupled with the stock market buying opportunity of a lifetime – turned conventional wisdom on its head. SALARY SACRIFICE: THE DOWNSIDES IN A CRISIS Salary sacrifice schemes are a contractual agreement between you and your employer to give up part of your salary in exchange for a non-cash benefit such as pension contributions, childcare support, bicycles, and ultra-low emission cars. The upside is you do not pay tax or National Insurance Contributions (NICs) on your foregonesalary.
IS IT SAFE TO INVEST IN CORPORATE BONDS? A lot of people arrive at this site after asking Google: Is it safe to invest in corporate bonds?. It’s a reasonable question, yet the answer is complicated. Many people are confused about what a ‘bond’ is, with good reason given how freely the financial services industry throws the word about. HOW THE BID-OFFER SPREAD INFLATES YOUR ETF COSTS The bid price (i.e. the highest price I can sell for) = 99p. The offer price (i.e. the lowest price at which I can buy) = 101p. The bid-offer spread = 2p per share (or 1.98%) The bid-offer spread therefore costs me 1.98% from the moment I buy into the MUG ETF, on LIFE EXPECTANCY FOR COUPLES: WHY IT'S SURPRISINGLY LONGLIFE EXPECTANCYAT 66
The chance that at least one of our pair will be alive in 50 years: 2.5% + 22.5% + 7.5% = 32.5%. Check out more investing maths fun with Monevator! Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. MONEVATOR - MAKE MORE MONEY, INVEST PROFITABLY, RETIRE EARLYTOOLSCONTACTARCHIVESBEST OFABOUTFOLLOW Living in a commuter town somewhere in middle England. Home is a three-bedroom, 720 square foot, house worth £249,000. £96,000 remains outstanding on the mortgage. Their pensions, investments, savings, cars, and other possessions are worth a combined £133,600. Giving them a total net worth of £286,600. BEST GLOBAL TRACKER FUNDS T he only equity allocation you really need is a global tracker fund, as ex-hedge fund manager Lars Kroijer has previously explained on Monevator.. It sounds almost too simple. But how do you choose the best global tracker fund from all the options? This updated guide willshed some light.
PROS AND CONS OF BEING WEALTHY Y ou want to be rich. Perhaps you plan to be very wealthy indeed. Who wouldn’t? Talking about the pros and cons of being wealthy seems as one-sided as a boxing match between Warren Buffett and Muhammad Ali.. However I’ve been giving this some thought – inspired by my strange and unfounded fear of winning £56 million pounds in the lottery – and there are quite a few bad points. WHAT YOU NEED TO KNOW ABOUT NOMINEE ACCOUNTS A nominee company is a custodian charged with the safekeeping of investors’ securities. It should be a separate entity from the broker itself. Your investments are held for you – on trust – in a nominee account. This means that while the nominee is the legal owner of the securities, you retain actual ownership as the beneficiary. INVEST IN ANTIQUE FURNITURE One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture. According to this antique blog entry from 2008: Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 a ‘dramatic PAY OFF THE MORTGAGE OR INVEST? W hen interest rates are high or rising, a tricky question for private investors comes to the fore: “Should I pay off my mortgage or invest?”. Most of the time, paying off the mortgage is a compelling option.But low mortgage rates such as we saw in 2009 and 2010 – coupled with the stock market buying opportunity of a lifetime – turned conventional wisdom on its head. SALARY SACRIFICE: THE DOWNSIDES IN A CRISIS Salary sacrifice schemes are a contractual agreement between you and your employer to give up part of your salary in exchange for a non-cash benefit such as pension contributions, childcare support, bicycles, and ultra-low emission cars. The upside is you do not pay tax or National Insurance Contributions (NICs) on your foregonesalary.
IS IT SAFE TO INVEST IN CORPORATE BONDS? A lot of people arrive at this site after asking Google: Is it safe to invest in corporate bonds?. It’s a reasonable question, yet the answer is complicated. Many people are confused about what a ‘bond’ is, with good reason given how freely the financial services industry throws the word about. HOW THE BID-OFFER SPREAD INFLATES YOUR ETF COSTS The bid price (i.e. the highest price I can sell for) = 99p. The offer price (i.e. the lowest price at which I can buy) = 101p. The bid-offer spread = 2p per share (or 1.98%) The bid-offer spread therefore costs me 1.98% from the moment I buy into the MUG ETF, on LIFE EXPECTANCY FOR COUPLES: WHY IT'S SURPRISINGLY LONGLIFE EXPECTANCYAT 66
The chance that at least one of our pair will be alive in 50 years: 2.5% + 22.5% + 7.5% = 32.5%. Check out more investing maths fun with Monevator! Thanks for reading! Monevator is a simply spiffing blog about making, saving, and investing money. HOW TO MANAGE MULTIPLE PORTFOLIOS 47 minutes ago · M any in the Monevator community ask about how to manage multiple portfolios, especially as part of a single family household.. Reader Sunil sums up the dilemma: I understand the importance of diversification, but what about across multiple portfolios? I have a SIPP and ISA, and run a SIPP and ISA for my wife. LOW-COST INDEX TRACKERS THAT WILL SAVE YOU MONEY This is our September 2020 update of the cheapest index trackers for British investors.If you’ve checked out this page before then know the main action this time is in the gold, UK gilts, total global bond, developed world, and emerging market equity categories. HOW MUCH WILL YOU LOSE IF BOND PRICES FALL? (AND WHAT IF Bonus appendix: Bond funds, duration and bond price calculators. It’s simplest to use duration as an approximate guide to your bond fund’s prospects when its market interest rate changes. As a rule of thumb, a bond fund (or bond) with a duration of 7 will: Lose 7% for every 1% rise in its yield. Gain 7% for every 1% fall in yield. COMPARE THE BROKERS AND SAVE MONEY Compare the brokers and save money. W ant to choose your own shares, ETFs, and funds? This tool compares over 20 providers and shows you the fees you’ll pay. Switching provider could save you thousands of pounds in just a few years. The tool makes some assumptions to compare the platforms, which may not match your situation. MANAGING AN INVESTMENT PORTFOLIO: HOW TO KEEP IT ON TRACK T his post is for anyone who wants to manage their own investment portfolio and needs to know how to keep it running smoothly.I’m going to explain how to perform an annual check-up using industry best practice and ideas from some of the best investment educators in thebusiness.
WHAT YOU NEED TO KNOW ABOUT NOMINEE ACCOUNTS A nominee company is a custodian charged with the safekeeping of investors’ securities. It should be a separate entity from the broker itself. Your investments are held for you – on trust – in a nominee account. This means that while the nominee is the legal owner of the securities, you retain actual ownership as the beneficiary. PROS AND CONS OF BEING WEALTHY Y ou want to be rich. Perhaps you plan to be very wealthy indeed. Who wouldn’t? Talking about the pros and cons of being wealthy seems as one-sided as a boxing match between Warren Buffett and Muhammad Ali.. However I’ve been giving this some thought – inspired by my strange and unfounded fear of winning £56 million pounds in the lottery – and there are quite a few bad points. WEEKEND READING: THE SCI-FI STOCK MARKET What caught my eye this week. T he sky above the port was the color of television, tuned to a dead channel.. So runs the first sentence of William Gibson’s Neuromancer, a book I first read as an 11-year-old and have judged technology against ever since.. As one of the first few thousand people in the UK to encounter the ‘World Wide Web’ in the very early 1990s, I half-saw Neuromancer CAN DOGS AND FINANCIAL INDEPENDENCE GO TOGETHER? 1 day ago · This article exploring dogs and financial independence is by The Mr & Mrs from Team Monevator. Check back every Monday for more fresh perspectives on personal finance and MANAGE SUBSCRIPTIONS You can follow the discussion on How to manage multiple portfolios without having to leave a comment. Cool, huh? Just enter your email address in the form here below and you’re all set. Email* Tools
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WEEKEND READING: THE SCI-FI STOCK MARKET by The Investor on June 5, 2021 _What caught my eye this week._ The sky above the port was the color of television, tuned to a deadchannel.
So runs the first sentence of William Gibson’s _Neuromancer_ , a book I first read as an 11-year-old and have judged technology against ever since. As one of the first few thousand people in the UK to encounter the ‘World Wide Web’ in the very early 1990s, I half-saw _Neuromancer_becoming half-true.
Admittedly I wasn’t sliding through coloured shards of anti-viral software in a 3D manifestation of hyperspace. But I was chatting to equally astonished kids in faraway Hyderabad. And I had an alternate life as a Dwarven catburgler in a multiplayertext-based MUD .
It was the shape of things to come.ALL TOGETHER NOW
To be honest, I’ve not re-read _Neuromancer_ for 20 years. Which is probably why reality seems to be catching up, regardless of what Gibson actually wrote. For example, I remember a scene in which a flash mob is summoned as some kind of tactical distraction, and the attendant street punks and ne’er-do-wells cause mass chaos both on the ground (or in ‘meatspace’, as the cyberpunks called it) and across variousdigital venues.
I’m not sure this scene takes place. Thinking about it now, I suspect it might have been in one of the sequels. But it certainly should have been in an early Gibson novel, because the man was a visionary about the unintended consequences of hooking humanity up to – and together with – technology, and those consequences are running amok in the stock market today.NOW SHOWING
How else to explain the loony activity we now routinely see in the stock market each week? The latest was a re-run of the Gamestop dramafrom earlier
this year, only the meme stock in the spotlight this time was US cinema chain AMC. Shares in the hitherto struggling operator doubled in a day. At one point it was up around 30-fold for the year. A giant push by retail traders from _Reddit_ (and piling-in professionals) took the marketcap to $30 billion.
Showing a commendable nimbleness at getting with the program, AMC management first wooed its new small owners with free popcorn. It then (rightly) dumped a load of new shares on the market to raise hundreds of millions of dollars the next day. So AMC’s future (though not its sky-high valuation) looks assured for now. All without a corporate restructuring or a tense boardroom meeting with bankers on Wall Street in sight. In some corners of the market, this is how the game is played thesedays.
It’s fake it until you make it on a corporate scale.PAGE NOT FOUND
It makes me feel old, if I’m honest. As Ben Carlson writes on hisblog
:
> The strange thing about this meme stock saga is we have and have not > seen this movie before.>
> Yes, speculation is as old as the hills and that part of the markets > will never go away.>
> But this is also very different from past excess.>
> This isn’t some hot new innovation people are bidding up in hopes > it becomes the next big thing. This is a company people know is not > worth its current value. No one is even pretending that’s true.>
> This is the internet bleeding into the markets in a big way. It’s > a coordinated viral meme working its way through the stock market. Ben nails it here. Like him, I believe the frictionless physics of the Internet has found its real-world proxy in the shadow theater of the financial markets, and the Internet-raised youngsters are having a field day. And so, increasingly, are the professionals. Hedge funds struggling to gain alpha in the mostly-efficient market must see excess irrationality to be gorged upon in these recurring bouts of zania. As Michael Batnick puts it:
> Small money might have lit the match, but big money is pouring > gasoline on the fire. Indeed while it’s still tempting to dismiss the meme stock pops and flops as an short-term consequence of bored lockdown trading, we can also see the outlines of how history will remember this era in widermarket trends.
For another incarnation of the zeitgeist, see the SPAC boom in the US. That’s seen hundreds of companies raise many, many billions for what are euphemistically called ‘blank chequecompanies’.
You might argue there’s a legitimate case to take companies public this way, especially if you’re one of the key promoterswho
got unfathomably wealthy from mad fad. But that doesn’t explain SPAC’s sudden explosion in popularity. Cheap money and this Fake It ‘Til The Market Makes It mindset does. Then of course there’s crypto, and Elon Musk sending Bitcoin hither and thither with a Tweet. Once an outlandish outsider, Musk’s antics over the past few yearsare
starting to seem like they were the shape of things to come, like a Shane Warne or John McEnroe of the markets. RETIRE TO A QUIET ROOM Some old hands see a return to normalitywith
crypto recently crashing, SPAC enthusiasm dying down, and the price of the frothier tech shares also falling.Well maybe.
Short of the punchbowl suddenly getting yanked by either the markets or by Central Banks, I suspect Josh Brown may be more on the money in a brilliant essay for _Fortune_:
> Jerry’s not on Twitter. He’s tired of hearing about all the > rhetorical twists and turns on the app that are constantly pushing > his stocks around.>
> Sports commentators and actors turned venture capitalists are > causing gyrations in the value of his retirement portfolio with > their online antics.>
> Remember when stocks traded on fundamentals? Or at least they traded > based on people’s perceptions of the fundamentals. What do they > trade on today? It was always a popularity contest. Now it’s a > three-ring circus.>
> It makes no sense. Jerry is tired.>
> Upstairs there’s a burst of excitement, the sound of a young man > cheering. It’s Jerry’s kid, Aiden.>
> Aiden’s been out of school for years. He’s making as much as > Jerry did 30 years ago. Josh says your father’s stock market is never coming back. I wonder if it’s all another sign that William Gibson’s surreal sci-fi future is rushing forward.We’ll see.
Have a great weekend everyone. Fingers crossed for 21 June,
eh?
THANKS FOR READING! Monevator is a simply spiffing blog about making, saving, and investing money. Please do check out some of the best articles or follow our posts via Facebook, Twitter, email orRSS.
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MANAGING AN INVESTMENT PORTFOLIO: HOW TO KEEP IT ON TRACK by The Accumulator on June 2, 2021 This post is for anyone who wants to manage their own investment portfolio and needs to know how to KEEP IT RUNNING SMOOTHLY. I’m going to explain how to perform an annual check-up using industry best practice and ideas from some of the best investment educators in thebusiness.
Maintaining your portfolio is easy once you know how. It shouldn’t take more than a few hours, once a year. This advice also applies if you’ve chosen the default options in a workplace pension scheme and want to know if it’s on track. Like servicing your car, a little investment maintenance goes a longway.
Here’s a brief summary of the topics we’ll cover on our portfolio management checklist: * RISK CONTROL – straightforward techniques to help you managerisk.
* PERFORMANCE CHECK – are you on target? * INFLATION ADJUSTMENT – keeping up with the cost of living. * VALUE FOR MONEY CHECK – are your funds and investment platformcompetitive?
* MAJOR LIFE CHANGES REVIEW – how a bolt-from-the-blue mightchange the plan.
RISK CONTROL
Before we can control risk, we need to know what risks are _really_ worth worrying about. The main investing risks people fear are: * Being wiped out. That is, losing all your money. * Not having enough to live on in the future. * Selling for a large loss. LOSING ALL YOUR MONEY is a disaster. But it’s a low probability if you invest in a global tracker fundand a high-quality
government bond fund . With a portfolio this diversified, the only thing that’ll wipe you out is a global end-of-capitalism catastrophe. This type of portfolio is not dependent on the fate of a single firm, industry, or even country. Rest easy on that score. NOT HAVING ENOUGH TO LIVE ON is dealt with by investing in growth assets like equities and making sure you put enough money into your pot. This risk is covered in the _performance check_ section of thisarticle.
SELLING AT A LARGE LOSS is the main risk that lies in wait – like piano-wire strung across your future. This risk is harder to control and widely underestimated. It can overwhelm you with little warning. There are two versions of this nightmare scenario:FAILURE TO RECOVER
The failure to recover scenario happens when a large pension portfolio is heavily invested in risky assets like equities – and then a stock market crash strikes on the eve of retirement. The portfolio suffers a major loss. The market bumps along the bottom for years. You’re forced to live on less because anemic equity returns fail to resurrect the portfolio. The investment portfolio management techniques laid out below can help you to guard against this risk.PANIC SELL
The stock market drops violently. The fear of losing everything swamps your mind. You panic and sell. The red line continues as you sit in cash, too frightened to buy back in the face of bad economic news. The green line shows that the market decline did continue after you sold. But a rally began shortly after, and eventually traced a U-shaped recovery. Equities recovered their losses and more, given enough time. But the red path shows how your loss was locked in. These calamities befall unwary investors around the world during every stock market crash. Nobody thinks it will happen to them, like that _Twilight Zone_ episode about the box.
Three risk control techniques enable you to tame these risks without hobbling the equity growth you need: * Monitoring your risk tolerancein a
downturn
* Rebalancing
* Lifestyling
MONITORING YOUR RISK TOLERANCE How much stock market risk can you handle? No-one knows until they’ve watched a crash vaporise pounds from their portfolio. Your portfolio may have defaulted into an industry-standard mix of 60% equities, 40% bonds. This is the _Goldilocks_ zone – neither toohot, nor too cold.
Or, perhaps you chose your allocation to risky equities using a classic rule-of-thumb like: 110 MINUS YOUR AGE = YOUR EQUITIES ALLOCATION (the rest is in bonds)
Both are reasonable starting points, but the gut test is a bear market. Your response to a mauling tells you whether your assetallocation is too
risky for you.
The wealth manager and investing educator William Bernstein offers a way to readjust using this table in his superb book _The Investor’sManifesto_ :
Risk tolerance
Equity allocation adjustmentVery high
+20%
High
+10%
Moderate
0%
Low
-10%
Very low
-20%
Choose a government bond fund for the non-equity part of yourportfolio.
Your risk tolerance is: VERY LOW if during the last bear market you suffered sleepless nights, felt sick, or panicked. Subtract 20% from your equity allocation. Now you’ll hold more in bonds for extra crash protection, but must expect lower growth. LOW if the downturn caused you mental pain. Subtract 10% from yourequity allocation.
MODERATE if you felt worried but held your nerve without losing sleep. No change to your allocation. HIGH if you rebalanced into tumbling equities during the bear market. Add 10% to your equity allocation. VERY HIGH if you’re frustrated the market didn’t slide further, enabling you to scoop up more equities on the cheap. Add 20% to yourequity allocation.
Beware, this table is a rule-of-thumb only. I find it helps to use market tremors to re-calibrate my risk levels before I’m hit bysomething seismic.
Use it at your own risk.REBALANCING
Rebalancing is a portfolio management technique to prevent your asset allocation from drifting into dangerous territory. This might happen when equity markets go on a tear – soaring to the sound of popping champagne corks in the City. The dark cloud in the silver lining is that rising valuations can silently shift your equity allocation. You might easily go from, say, a desired 60% in equities to an actual allocation of 70% or more. Rising equities sounds fine until the market crashes back to Earth with terrifying speed and savagery. The nosedive takes your portfolio with it, because you hold proportionally less bond protection than youused to.
ANNUAL REBALANCING counters this risk by nudging your allocation back into line. It’s like when you touch the steering wheel of your car to prevent it veering out of its lane. By selling some of your outperforming assets once a year and buyinglaggards you:
* Realign your asset allocation with your chosen risk level. * ‘Sell high and buy low’ – looking to profit from the tendency of underperformers to bounce back. (Or mean-revert, in thejargon).
We’ve explained before how annual rebalancing is done. It’s simple. Easier still if you rebalance with new money.
If you’re invested in a multi-asset fund like Vanguard LifeStrategy then your portfolio is automatically rebalanced for you. Auto-rebalancing only applies to such multi-asset funds. For
example, a fund that holds equities and bonds in the same investingvehicle.
You can email your fund provider to find out how they rebalance. It’s fine to rebalance once a year.LIFESTYLING
Lifestyling is a brilliant way to head off the _failure-to-recover_ scenario, wherein a portfolio is poleaxed by a crash just as you’re on the home straight to retirement. You can also use the same principle to manage an investment portfolio earmarked for a non-retirement objective, such as a uni fund for yourkids.
RETIREMENT LIFESTYLING The standard advice for young investors is to choose an aggressive equity allocation, perhaps as high as 80%. That’s a pro-growth strategy. It’s predicated on the idea that as a young person you can shrug off a market meltdown because: * You don’t have much skin in the game. If a small portfolio halves in value, you’re unlikely to panic. The loss is dwarfed by your future investment contributions. * The bulk of your working life is ahead of you. You can afford to wait for the market to recover and buy equities cheap in the meantime. This is the theory of human capital underpinning that ‘110 minus your age’ rule-of-thumb.1 The logical consequence is you should be in 45% equities, 55% bonds asyou turn 65.
Lifestyling using this rule means you sell 1% of your equities and buy 1% extra in bonds, every year, to manage the transition. You can do it at the same time as you rebalance. This way all of your portfolio maintenance is done in a one-er. This subtle drip-drip of wealth from equity stalactite to bond stalagmite transforms your portfolio. Instead of a petrifying dagger ready to drop from the ceiling, your portfolio de-risks into a mighty tower of wealth anchored by a floor of shock resistant assets.
However, the ‘110 minus your age’ wisdom was devised when bondreturn prospects
were better than today.STAY ON TARGET
A more modern incarnation of this idea is a Target Date fund. Like the lifestyling heuristic, Target Date funds gradually shift your asset allocation from equities to bonds as you age. Vanguard’s version – a Target Retirement fund– keeps
investors 80% in equities until age 43. The fund then automatically descalates your risk by lifestyling down over time to 50% in bonds byage 68.
If you mimicked this path by lifestyling equities to bonds at 1% per year from age 40, you’d be 60% equities by age 60. This pattern acknowledges the muted growth prospects of a low interestrate world.
(It also assumes a classic retirement age of around 65 to 68. You’d de-risk earlier if you’re on track for Financial Independence RetireEarly .)
Don’t ignore your own risk tolerance if you’re young yet 80% equities makes you uncomfortable. Go lower if you need to, or aren’t sure how much you can handle. That said, people who choose Target Retirement funds typically leavethem on auto-pilot.
Blissful unawareness of market quakes makes it much easier for Vanguard to hold people at 80%. I believe Target Date funds are a brilliant idea. If you don’t fancy managing an investment portfolio at all, they’re a godsend. But personally I think Vanguard’s Target Retirement fund weights bonds too heavily later in life. Its equity allocation is only 30% by age 75. That’s a decision for another decade, though. You can always weight your portfolio differently nearer the time. LIFESTYLING FOR NON-RETIREMENT OBJECTIVES You’ve seen those industry warnings about equities being unsuitable for objectives fewer than five years away. Equity volatility means you never know how much your shares will be worth tomorrow. So if you want to save for a specific amount on a specific date, equities are not reliable. Retirements can be delayed – or you can live on less. But perhaps you’re investing to send the kids to college in 18 years time, or to pay off the mortgage in 25 years? (Ballsy!) Holding 50% – or arguably even 20% – in equities is madness as you glide into land, if you haven’t got any other way of avoiding anundershoot.
Larry Swedroe is another renowned wealth manager dedicated to educating investors. He came up with a rule-of-thumb for managing this risk in his book _The Only Guide You’ll Ever Need for the RightFinancial Plan_ :
Investment horizon (years) Max equity allocation0-3
0%
4
10%
5
20%
6
30%
7
40%
8
50%
9
60%
10
70%
11-14
80%
15-19
90%
20+
100%
Notice how Swedroe puts the portfolio on a steep descent out of risky equities inside ten years from the target date. This speaks to the unpredictability of equities. Over the long-term, equities are the best asset for growth. But anything can happen in the space of a few years. Remember this is an informed rule-of-thumb.
Treat those equity allocations as a maximum. Dial them back more if you can, and keep the rest in bonds and cash.PERFORMANCE CHECK
How do you know if your investments are doing well? Should you switch funds that haven’t performed well in the last year? What about that co-worker who keeps banging on about the killing he’s making incrypto?
First things first: your portfolio is likely heavily exposed to the stock market. So your annual performance _will turn_ _on the fortune_ of the market that year, for better or worse.The evidence
shows you can’t avoid that truth but you can turn it to youradvantage.
It’s a myth that you can identify a brilliant fund manageror stocks to
beat the market over the long-term. What looks like over-performance is often a LUCKY STREAK. Or it costs so much in fees that you end upworse off.
The antidote is a passive investing strategy that uses a diversified portfolio of low-cost index tracker fundsto cream off the
profit from the market. Global stock markets rise over the long-term so you should do very well as your profits compound.
The counter-intuitive truth is that you DON’T NEED TO WORRY about your portfolio’s performance day-to-day – or even annually. But the short-term is a crapshoot. The market has a roughly 50:50 chance of a loss on any single day. It’s likely to be down one year in three. But it recovers, and over 20 years equities are favourite to outperform every other asset class. So for the best peace of mind don’t check your portfolio more than annually. Don’t download a mobile portfolio app. The longer you leave it alone, the better your chance of seeing good news when youcheck-in.
Ignore short-term fluctuations, because you can no more control the market than King Canute can command the sea. As for that annoying co-worker, he’ll slink back under his rock next time his dogecoin is slaughtered by a careless Elon Musk Tweet. FACTORS YOU CAN CONTROL The factors that decide your fate _and_ that lie within your controlare:
* How much you invest * For how many years you invest * Your target income* Investing costs
The magic formula is: * Invest more to enjoy a bigger income in retirement and/or shortenyour timeframe.
* Invest longer to enjoy a bigger income and/or lower your investment contributions. * Lower your target income to invest less and/or shorten yourtimeframe.
* Lower your costs to improve every outcome. You can see how this works by playing with the excellent retirementcalculator at
Hargreaves Lansdown . It enables you to feed in your personal numbers and check whether you’re on track to retire. Think the income you’re headed for is tight? Then watch how your fortunes change if you increase your contributions or delay yourretirement.
Perform this check annually and you’ll have a firm grip on whether your pot and contributions are big enough, based on currentprojections.
Don’t mess with the calculator’s 5% estimated annual growth rate. But you can lower the annual management charge to 0.5% (via ‘advanced options’, tucked down bottom right on the results page) if you choose keenly-priced tracker funds and a competitive platform.
* Find out more about using a pension calculatorto stay on track.
* Our financial independence planarticle will help
you work out how much retirement income and pot you’ll need. INFLATION ADJUSTMENTJust as inflation
nibbles away at your wages, it also gnaws away at your pension. UP-WEIGHT YOUR INVESTMENT CONTRIBUTIONS in line with inflation every year to help your portfolio keep up with prices. You can find the UK’s official inflation figures at the ONS.
* CPI-H is the headline rate. It takes housing costs into account. * RPI is almost always higher. Using this may put you ahead of thegame.
Some _Monevator_ mavens use their personal inflationrate or average UK
earnings as potentially better gauges of the cost-of-living. Calculate your inflation-adjusted contribution as per this example: Current monthly contribution: £500 Annual inflation rate: 3% 500 x 1.03 = £515 new monthly contribution adjusted for the past 12 months of inflation. You should increase your target income and target retirement pot number in exactly the same way. VALUE FOR MONEY CHECK As long as you’ve chosen a price competitive portfolio of index trackers then you don’t need to worry about switching investment funds. Switching for performance-related reasons is like changing toothpaste brand in the hope of better results on the dating scene. But it’s worth checking that your trackers still offer good value versus their rivals every few years. Check using our comparison of: * The best global equity trackers * The best bond trackers * Other asset classes Investing platforms/brokers also charge fees. Make sure they’re not milking you, either. Our broker comparison tableshows your
options.
We’ve previously outlined how to find the best value platformfor you.
There’s no need to perform this check annually. Every three years is enough to stay in touch with the price league-leaders. Don’t sweat tiny changes in cost, either. A fee differential of 0.1% on £10,000 is just £10. That would cost you £50 a year on a £50,000 portfolio if, for example, your fund’s Ongoing Charge Figure (OCF) is 0.25% instead of 0.15%.TAX LOSS HARVESTING
If you own investments outside of your ISA or SIPP then you can reduce your capital gains tax bill by offsetting trading lossesbefore the
April 5th deadline.
MAJOR LIFE CHANGES REVIEW Marriage, children, career change, redundancy, divorce, ill-health, death, inheritance…Such milestones of life may trigger a reassessment of your investment portfolio and your risk tolerance. For example, an inheritance may transform your fortunes. Perhaps you can reduce your equity exposure. You need less growth, so you can takeless risk.
On the other hand, an even bigger windfall can catapult you so far ahead that you can take even more risk! If you’ve already got more money than you can spend, it doesn’t matter how your equitiesperform.
It’s nice to dream but major life changes could be the perfect time to seek financial advice.
MANAGING AN INVESTMENT PORTFOLIO CHECKLIST Here’s a run through of the techniques we’ve explored in thisarticle:
Monitoring risk tolerance Frequency: After every major downturn of 20%+Rebalancing
Frequency: Annually
Lifestyling
Frequency: Annually
Performance check
Frequency: Annually
Inflation adjustmentFrequency: Annually
Value for money check Frequency: Every three years TAX LOSS HARVESTING (not possible within ISA/SIPP)Frequency: Annually
Major life changes review Frequency: As and when I wish you good fortune in managing your investment portfolio. It’s entirely doable to go the DIY route provided you stick to the investing essentials and ignore the get rich quick sirens of _YouTube_. You don’t need specialist knowledge, skills, or a huge amount of time. I’ve never regretted managing my own portfolio. Let us know how you get on.Take it steady,
_The Accumulator_
* Or 100 minus your age, or 120 minus your age, or whichever versionyou subscribe to.
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LEARNING CANTONESE AND LEARNING INVESTING? SAME DIFFERENCE by Team Monevator on May 31, 2021 _This article on learning Cantonese and investing comes courtesy of BUDGETS AND BEVERAGES from Team Monevator._ _Check back every Monday for more fresh perspectives on personal finance and investing from theTeam._
_‘YAM YAM TSAA?’__‘HAWA, HAWA’._
This has become my favourite phrase when I visit my in-laws. Phonetically written, it means _‘Cup of tea?’_ with my response being _‘Yes. Yes.’_ They’re Chinese you see, and they speak Cantonese. I don’t. But as I’m on a constant search for where the next hot beverage is going to come from, I had to learn the essentials. And learning the essentials has led me to trying to learn the language completely, enrolling on a ten-week beginner Cantonese course. (Spoiler alert: It’s a really hard language to learn.) LEARNING CANTONESE AND INVESTING Slowly and surely, I’m beginning to pick things up. Every Thursday evening, I arrive at my Cantonese class (online of course) and I listen, read and practice. In really basic terms, I’m starting to see progress. The same can also be said about my investing portfolio. I’m in the early days with that, too. On reflection, it appears Cantonese isn’t the only language I’mtrying to learn.
The world of personal finance is completely new to me. There’s new phrases to learn, new voices to listen to, and new ideas tounderstand.
Six months ago, I had no idea about compound interest , low-cost broad-based index funds, or the world of financial independence. But on one miserable afternoon in Manchester, with a hot cup of tea my only source of any warmth, I googled_ ‘how to retire early?’_ And I plunged so deep into the rabbit hole of financial independence, that my beverage went cold. Just kidding. I’d never allow that to happen. THE WORLD OF FINANCIAL INDEPENDENCE Just like with Cantonese, I began to listen, read, and learn. And just like with Cantonese, I quickly began to realise there is plenty of information to take on board with investing. So I went back to basics and started with the essentials. For me, that was reading JL Collins’ book _The Simple Path To Wealth_. Original right?
But it worked. I began to understand the basic concept of index investing, ETFs, and the power of ‘buy and hold.’ The last being a useful lesson to learn during a global pandemic. Enthused, excited, and energised, I wanted to learn more. And herein lies my next lesson learnt.ASK FOR HELP
As you’ve probably gathered, my partner is Chinese. She speaks Cantonese fluently and communicates with her family in this language, even in my company. No exceptions are made on my behalf. Side note, this was also the case when I went to Hong Kong a couple of years ago. After many months apart, my partner and her extended family caught up on each other’s lives, whilst I hoovered up as much dim sum as possible. That and green tea of course. By the end of the trip, I weighed a lot more but I was VERY refreshed.Anyway, I digress.
Despite hearing Cantonese in my life daily, I never asked for help. I’d shut myself away, trying to learn it secretly, whilst dreaming of the day I suddenly interrupted my partner’s family conversation by joining in with Cantonese. Their faces would be a picture! Oh how we’d laugh! Realistically, this was never going to happen. Until I asked for help. I not only invested in myself with an educational course, but I told my partner and her family about my intentions. Surprise, surprise, I’ve learnt more in four weeks than I did in the previous four years of sporadically and secretly trying to learn it on my own. Again, the same can be said about investing. With my Vanguard account open and my first deposit made, I imagined the moment of handing in my notice and walking into my new future. _‘Where are you going to?’_ _‘Nowhere, I’m retiring early.’_ What a moment that would be! Except, in the first month, my index fund went down. And down. And down again. Had I withdrawn, I’d have lost a decent sum of money. With ‘buy and hold!’ ringing in my ears, I left it alone. Thank goodness I
did.
But it was a lesson. I needed to learn more. So I asked for help. That came via books, podcasts, and reading blogs. Genuinely, a lot of the help I got was from this website . And they haven’t even paid me to say that. Although they have sent me a box of PG Tips, so read into that what you wish. There’s plenty of help out there, in a medium that serves you best. As a helping hand, _THIS IS A GOOD PLACE TO START_.
SMALL STEPS LEAD TO MOMENTUM The thing is, asking for help initially has led me to learning more, meeting new people and now, writing my first blog for _Monevator_. Honestly, it feels a bit surreal. Six months ago, I had no idea about any of this. Now, I’m fortunate enough to be writing about something that I feel really passionateabout.
No longer am I interested in keeping it a secret either. I want to play my part in helping others start their journey too. Although here’s the disclaimer: I’m still learning the essentials. THE LIGHTBULB MOMENT Even that can feel like a pretty big place to start. But the point is starting. Because once you start learning, it’s hard to find thebrakes.
Dave Ramsey (a big player in the financial independence world) speaks about snowball momentum when it comes to paying off debt. The idea that you pay off your smallest debt first, and once complete, you move those payments to the next largest debt, before rolling that into your next debt, and so on and so forth. With each debt paid off, your debt-clearing payments will become bigger, so the next debt gets paid off faster. You’ll gain momentum and see progress. For me, this concept doesn’t only apply to debt. Whether it was paying for my course or reading my first personal finance book, I got the ball rolling. Now momentum is gathering pace. Why? Because I’ve had my lightbulb moment . In fact, I’ve had a fair few of them. That moment when something clicks, when you understand it, when you feel yourself gain knowledge. It’s a wonderful release of endorphins. Last month, I heard my partner chatting to her dad and I understood a handful of words. It was a brilliantly reassuring moment. Sure, it was a half-hour conversation, but let’s not run before we can walk. I also recently introduced my sister to low-cost broad based indexfunds . When she
asked me why she couldn’t just put her life savings into Costa, Starbucks, and Pret a Manger (I’m not the only beverage-addict in the family), I explained the importance of diversification and why it’s vital to have an equity/bonds balance that suits her tolerance for risk and volatility. I’ve just re-read that last sentence. It’s laughable that I can even put those words in that order. Six months ago, I had no idea about any of that. But this emphasises my point. You don’t need to make a big statement. You don’t need to set unrealistic targets. The beauty about learning how to manage your money is that there is no finish line. And that’s not a bad thing. You can go as far down this road as you wish, at your own pace, having as many lightbulb moments as you want. Just make sure you get off thestart line.
I’m not going to be fluent in Cantonese by the end of this year. I won’t be fluent by this time next year. My children will probably be able to speak it better than me. But I know, that as long as I keep reading, listening and practicing, then I’ll get better and I’ll gain more knowledge. The same applies to my financial independence journey. The world of financial independence is huge. But please don’t be overwhelmed. Together, we can just start by learning the essentials – and flick on somelights as we go.
As long as we flick the kettle on, too. Although I have no idea how to say that in Cantonese! _In time you will be able to see all Budgets and Beverages’ articles in his dedicated archive._
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WEEKEND READING: A TALE OF TWO MARKETS – US VERSUS UK SHARES by The Investor on May 28, 2021 _What caught my eye this week._ Every time a US financial pundit talks about the long bull market or sky-high equity valuations, remind yourself they’re almost invariably talking about US shares. The US comprises roughly three-fifths of the global equity market by value. Handy for North American home bias fans. And of course the global tracker funds that passive investors are well advised to use will therefore be very exposed to the US market, too. Finally, where the US leads, others tend to follow – directionallyif not in lockstep.
So the dearness or otherwise of US shares matters. Still, it’s interesting to compare Uncle Sam’s rip-roaring equity-ganza with our own domestic damp squib. US VERSUS UK SHARES IN TERMS OF RETURNS The latest edition of the _Barclays Equity Gilt Study_
summarizes returns from the US and UK markets in its usual tables. Here’s the returns from US assets: Click to enlarge the US returns And here’s the returns from the UK: Click to pump up Britannia Over the past 20 years US shares have delivered real returns of 5.5%. That compares to just 1.7% for their UK counterparts. And in the last year covered, US shares clocked up over 19% in gains. Whereas UK shares delivered worse than 10% in _negative_ returns.THE OLD SWITCHEROO
If you wonder why US shares are all the rage after seeing these numbers, you need a new hobby. And if you don’t appreciate at a glance why the tech-heavy US index pulled ahead during a stay-at-home pandemic, you’ve got some readingto do.
However I believe it’d be a huge mistake – as so many seem to do – to think US shares will continue to outperform anything like so heavily, for decades to come, while the UK market slides intoirrelevance.
These things have a habit of correcting themselves. I expect over a very long period US shares will still put up higher returns – for various structural reasons – but I’d be surprised if the UK doesn’t have the edge over the next 20 years. Unfortunately, that’s a hunch, not a scientific fact. Over the long-term starting valuations matter, but they don’t explain all of subsequent returns. And in the short run, anything could happen. Still, if you’re one of the vanishing breed of stock pickers who hunts your quarry on the London Stock Exchange, you might breathe alittle easier.
Also if I was a passive investor in the Vanguard UK LifeStrategyfunds that slightly
overweight UK equities, I’d not lose a moment of sleep over it. If there was ever a time to be a mildly (tilted, never all-in or all-out) nationalistic UK investor, it would seem to be now. Have a great long weekend everyone!{ 38 comments
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