Post by Fletchsmile on Jan 7, 2016 14:25:02 GMT 7
a few basics to think of....
the question of whether you're taking enough risk is an important one...
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Five New Year resolutions for investors
Danny Cox | 6 January 2016 | A A A
At some point, we’ve all made a New Year’s resolution in the hope of improving our lives for the upcoming year and beyond. As you might be unsurprised to learn, it is estimated only 8% of individuals manage to stick to their resolutions.
One of the main problems when setting New Year’s resolutions is many set vague, over achievable goals where it is easy to stray off course. The same is also true when investing where it is important to know what you are saving for and putting in place the steps required to achieve your goals.
Below, I’ve provided five achievable New Year’s resolutions to help investors in 2016.
1. Plan ahead for the new dividend tax and personal savings allowance
From 6 April 2016, the taxation of both dividends and cash changes. The first £5,000 of dividend income will be tax free; however dividend income above this will suffer a higher tax rate (an increase of 7.5 percentage points).
Additionally, all savings income will be paid without income tax deduction, including interest on cash deposits, gilts and corporate bonds, and interest from P2P lending. Basic rate tax payers will have a tax-free personal savings allowance of £1,000 a year and higher rate taxpayers £500.
Investors should plan ahead making the most of these new tax free allowances to minimise the tax on their savings and investments. It continues to make sense to fully use your ISA and Pension (SIPP) allowances as well as sheltering income-producing assets in your ISA and SIPP before growth assets. This is because the rate of tax paid on income is generally higher than on capital gains and capital gains tax can be avoided altogether if profits are less than £11,100 a year (2015/16). Remember tax rules can change and benefits depend on personal circumstances.
Furthermore, you can hold more low yielding assets outside of ISA before exceeding the dividend allowance. For example a £140,000 equity income portfolio yielding 3.5% would pay just under £5,000 a year in dividend income, tax-free within the dividend allowance. However investors could shelter a £500,000 portfolio with a lower yield of 1% before paying tax on the dividends.
2. Don’t hold too much cash
Cash savers are now facing their eighth consecutive year of low interest rates with only the smallest glimmer of light at the end of the tunnel. The market is now expecting an increase in the middle of 2016, but savers could be let down yet again. Even when rates do rise, it is likely to be small and gradual, offering little comfort to cash savers after so many years of financial pain.
Longer term, the markets tend to produce better returns than cash. Yields from equity income funds are currently around 3% to 4% which compares favourably to best buy savings accounts and provides growth potential.
Many investors question whether they are taking too much risk, but few ask if they are taking enough risk. Risk and return are related and taking less risk is fine if that meets your needs. It is important to hold cash, just not too much as it is likely to lead to lower returns over the long term due to the effects of inflation.
3. Conduct an annual portfolio review
All investors should review their portfolio at least once a year. This way there are no nasty surprises waiting for you when you finally come to cash in your investments. Investors should keep an eye on how their funds are performing and weed out any serial underperformers.
In Vantage, we make it easy for clients to review their investments both online and via our apps for smartphones and tablets. This gives our clients a bird’s eye view of their holdings as well as easy and low cost trading when they need to switch. More on our charges »
Finally, investors need to consider whether their portfolio is still appropriate for them in light of any changes in their personal circumstances, such as their employment status and dependants and if necessary, seek personal advice when needed.
4. Choose properly active or the right passive funds
When choosing funds, investors should either pick a fund that closely (and cheaply) tracks a particular market or index (a tracker fund), or a fund that employs a skilled fund manager to hopefully provide long-term outperformance of its benchmark. In our view, too many funds are ‘closet trackers’ which do neither of these things – they charge high fees and provide an index-like return.
To help our clients avoid this problem, our research team analyse thousands of funds to find the managers we believe are able to add value for investors. The culmination of all our research is our Wealth 150 and Multi-Manager funds which we believe will serve investors well over the long term.
Our Multi-Manager funds are managed by our sister company Hargreaves Lansdown Fund Managers. Investors should bear in mind that a Multi-Manager approach carries higher costs than other funds.
5. Consolidate investments
Getting all your investments under one roof will help make them more manageable. Being able to look through your portfolio online 24 hours a day, seven days a week is a convenience now available to investors. But there are plenty of investors still running their portfolio from an overstuffed drawer full of paper.
The New Year might provide an opportune time to bring all your investments together making your investments easier to manage. Transferring to an ISA, SIPP and investment account is a straightforward process – you can even transfer your investments online. Before transferring a pension you should ensure you will not lose valuable benefits or incur excessive transfer penalties.
www.hl.co.uk/news/articles/five-new-year-resolutions-for-investors
the question of whether you're taking enough risk is an important one...
========================
Five New Year resolutions for investors
Danny Cox | 6 January 2016 | A A A
At some point, we’ve all made a New Year’s resolution in the hope of improving our lives for the upcoming year and beyond. As you might be unsurprised to learn, it is estimated only 8% of individuals manage to stick to their resolutions.
One of the main problems when setting New Year’s resolutions is many set vague, over achievable goals where it is easy to stray off course. The same is also true when investing where it is important to know what you are saving for and putting in place the steps required to achieve your goals.
Below, I’ve provided five achievable New Year’s resolutions to help investors in 2016.
1. Plan ahead for the new dividend tax and personal savings allowance
From 6 April 2016, the taxation of both dividends and cash changes. The first £5,000 of dividend income will be tax free; however dividend income above this will suffer a higher tax rate (an increase of 7.5 percentage points).
Additionally, all savings income will be paid without income tax deduction, including interest on cash deposits, gilts and corporate bonds, and interest from P2P lending. Basic rate tax payers will have a tax-free personal savings allowance of £1,000 a year and higher rate taxpayers £500.
Investors should plan ahead making the most of these new tax free allowances to minimise the tax on their savings and investments. It continues to make sense to fully use your ISA and Pension (SIPP) allowances as well as sheltering income-producing assets in your ISA and SIPP before growth assets. This is because the rate of tax paid on income is generally higher than on capital gains and capital gains tax can be avoided altogether if profits are less than £11,100 a year (2015/16). Remember tax rules can change and benefits depend on personal circumstances.
Furthermore, you can hold more low yielding assets outside of ISA before exceeding the dividend allowance. For example a £140,000 equity income portfolio yielding 3.5% would pay just under £5,000 a year in dividend income, tax-free within the dividend allowance. However investors could shelter a £500,000 portfolio with a lower yield of 1% before paying tax on the dividends.
2. Don’t hold too much cash
Cash savers are now facing their eighth consecutive year of low interest rates with only the smallest glimmer of light at the end of the tunnel. The market is now expecting an increase in the middle of 2016, but savers could be let down yet again. Even when rates do rise, it is likely to be small and gradual, offering little comfort to cash savers after so many years of financial pain.
Longer term, the markets tend to produce better returns than cash. Yields from equity income funds are currently around 3% to 4% which compares favourably to best buy savings accounts and provides growth potential.
Many investors question whether they are taking too much risk, but few ask if they are taking enough risk. Risk and return are related and taking less risk is fine if that meets your needs. It is important to hold cash, just not too much as it is likely to lead to lower returns over the long term due to the effects of inflation.
3. Conduct an annual portfolio review
All investors should review their portfolio at least once a year. This way there are no nasty surprises waiting for you when you finally come to cash in your investments. Investors should keep an eye on how their funds are performing and weed out any serial underperformers.
In Vantage, we make it easy for clients to review their investments both online and via our apps for smartphones and tablets. This gives our clients a bird’s eye view of their holdings as well as easy and low cost trading when they need to switch. More on our charges »
Finally, investors need to consider whether their portfolio is still appropriate for them in light of any changes in their personal circumstances, such as their employment status and dependants and if necessary, seek personal advice when needed.
4. Choose properly active or the right passive funds
When choosing funds, investors should either pick a fund that closely (and cheaply) tracks a particular market or index (a tracker fund), or a fund that employs a skilled fund manager to hopefully provide long-term outperformance of its benchmark. In our view, too many funds are ‘closet trackers’ which do neither of these things – they charge high fees and provide an index-like return.
To help our clients avoid this problem, our research team analyse thousands of funds to find the managers we believe are able to add value for investors. The culmination of all our research is our Wealth 150 and Multi-Manager funds which we believe will serve investors well over the long term.
Our Multi-Manager funds are managed by our sister company Hargreaves Lansdown Fund Managers. Investors should bear in mind that a Multi-Manager approach carries higher costs than other funds.
5. Consolidate investments
Getting all your investments under one roof will help make them more manageable. Being able to look through your portfolio online 24 hours a day, seven days a week is a convenience now available to investors. But there are plenty of investors still running their portfolio from an overstuffed drawer full of paper.
The New Year might provide an opportune time to bring all your investments together making your investments easier to manage. Transferring to an ISA, SIPP and investment account is a straightforward process – you can even transfer your investments online. Before transferring a pension you should ensure you will not lose valuable benefits or incur excessive transfer penalties.
www.hl.co.uk/news/articles/five-new-year-resolutions-for-investors
