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Two Key Factors To Consider Before Taking Your Money Out Of The Stock Market

Wondering how Jeremy Hunt's changes to pensions taxes will affect you? Learn more about the budget 2023 and how it could impact your pension savings.

Two Key Factors To Consider Before Taking Your Money Out Of The Stock Market

By David Pritchard

 

As stock markets face turbulence, investors tend to get nervous, and the UK market has been a particularly stormy sea over the past year. With rising inflation concerns and a potential recession, it’s certainly had a tough time.

As a result, most investments have fallen over the last 18 months. This development, coupled with the cash deposit rates many banks currently offer, raises a new question for investors.

Should you sell some of your investments and move them over into deposits?

In this blog, we’ll explore whether your money is better off in the market or in the bank. There are two key factors to consider before making this investment decision.

1. Selling your investments could mean crystallising the loss

The value of any investment may go up or down, depending on the state of play within the market. However, if your investments have lost value and you sell them, you “lock in” those losses, and they become real and permanent. Once you sell, you can’t recover your losses even if the investment would have gone back up in value later on.

Many investments, over a medium to long term, usually outpace inflation and will eventually recoup any temporary losses. This means that if you’re patient and hold onto your investments, there’s a good chance that they will recover their value over the next one to two years.

2. Deposit rates have traditionally always underperformed inflation

While keeping your money in a bank is stable and not volatile (it won’t suddenly drop in value like a stock might), you’re still effectively losing money due to inflation. Deposit rates have traditionally always underperformed inflation.

At the moment, inflation is just under seven per cent while deposit rates are at five per cent. This means you’re essentially losing two per cent of your money’s purchasing power each year. At the end of the day, you won’t be able to make any positive returns because your money’s value isn’t growing faster than the rate of inflation.

The market will recover

The equity market, property market and fixed interest market are likely to recover in value over time. They currently look cheap (particularly in the equity market), so if you have extra money lying around, now might be a good time to invest.

Inflation will likely drop to five per cent by the end of this year, and go even lower to about two to three per cent by 2024. Interest rates are expected to follow the same trend, and regardless of where they end up, these rates will likely still be lower than the rate of inflation. 

That means that even future ‘high’ interest rates won’t necessarily be a good deal when you consider the loss in buying power due to inflation.

The bottom line

In general, it’s not about trying to pick the perfect moment to buy or sell (timing the market), but rather about how long you can keep your money invested (time in the market). Medium to long-term investments will always outperform deposit rates and inflation in normal terms. 

The longer you keep your money in various investments, the more opportunity there is for those investments to grow.

Our overall recommendation is: whatever cash you do keep in the bank, try to get the best deal you can in terms of interest rates. This will help your rainy day fund increase over time.

For the rest of your money – the part that’s invested in things like stocks, property or bonds  – don’t rush to sell them off simply because their value has dropped. Hold onto them until they (eventually) recover.

If you’d like to find out more about how to protect the value of your investments, stay tuned to our podcast, A Dab Of Investment.

And if you’d welcome our input, expertise and experience, please get in touch by emailing me at david@applewoodindependent.co.uk.

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.

 

Proud Sponsors of the Nantwich Food Festival 2023

Proud Sponsor of the Nantwich Food Festival

By Applewood Independent

 

Applewood Independent are proud to have sponsored this year’s Opening Festival and the Love Lane Marquee at the Nantwich Food Festival.

The sun was shining and what another amazing weekend of events. Nantwich Food Festival is one of the largest free entry food festivals in the UK and brings local companies together along with the community.

The streets were full, and the atmosphere was like no other. Food, drink, and local businesses all turned out to showcase themselves and the stands and stalls were as striking as ever before.

We just love to see the community coming together and that’s why it’s so important to us as a business to give back and get involved in these incredible local events.

 

Understanding Alternative Investments: Should You Invest In Alternative Assets?

Wondering how Jeremy Hunt's changes to pensions taxes will affect you? Learn more about the budget 2023 and how it could impact your pension savings.

Understanding Alternative Investments: Should You Invest In Alternative Assets?

By David Pritchard

 

Could fine wine and art have a place in your investment portfolio?

Beyond traditional stocks and shares, there are other exotic ways to generate returns on your investment – as long as you know what you’re doing. They’re called alternative investments. Alternative investments have been around for many years – albeit having a relatively low profile among mainstream investors.

But what are these alternatives? And are they better than your traditional equity markets?

Read on to find out more.

What are alternative investments?

 Alternative investments are investments outside the scope of conventional assets (such as stocks and bonds). These can be commercial property, infrastructure or, in many cases, collectables such as antiques, art, classic cars and fine wine.

 For the purpose of this blog, most of our focus will be on collectables.

 These assets – when purchased through a reputable dealer who knows the market – can be a useful addition to your investment portfolio. However, there are a few downsides to be aware of.

The cons of collectable investments

 A major downside to these assets is that they typically do not generate income comparable to an equity portfolio.

 Unlike an equity portfolio which is easily sellable, investable and pretty liquid (meaning you could sell it today and get your money in a few days), collectables often lack these advantages. If people don’t like the piece of art or vintage wine you have, you may not be able to sell it as quickly or for as much as you would wish.

 There’s also the fact that you need to store the item and insure it, all of which costs money. So, it’s highly important to consider carefully whether these added costs will wipe out any returns you earn on the asset.

Should you invest in alternative assets?

 Investing in something like art or antiques can be an interesting hobby, no doubt. But, I certainly wouldn’t suggest that they should form the bulk of your investment portfolio unless you’re an expert in the specific field.

 We once had a client who invested tens of thousands of pounds into a wine collection without prior consultation. It turned out that the fees he paid were over the market average, and his storage costs were also higher than usual. In the end, he managed to get rid of the wine – though not without losing a significant amount of money.

 That’s why it’s so important to speak to an independent financial adviser before you inject money into any asset at all.

In a nutshell

 To round up: many physical alternative investments can be beneficial in the sense that in addition to it being an investment, you can physically own the assets and even get to enjoy them in the meantime. But as with any other investment pathway, you need to watch out for potential pitfalls.

 Essentially, it’s still risky to invest in anything – whether that’s commercial property, fixed-interest funds or collectables. So, if you have an interest in collectable assets, do your research and find a reputable dealer to help you. Bear in mind that these dealers will always try to sell you something in order to make a profit.

 In addition to these best practices, diversify your assets and compare your return on investments after costs to see if it’s a better or similar return to what an equity-based portfolio would typically yield.

 For more information on alternative investments, check out the latest episode of our podcast, A Dab Of Investment. 

 And if you’d welcome our input, expertise and experience, please get in touch by emailing me at david@applewoodindependent.co.uk.

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.

 

The 3 Core Pillars Of A Successful Client-Adviser Relationship

What does 2023 hold for the global stock market?

The 3 Core Pillars Of A Successful Client-Adviser Relationship

By Alex Pritchard

 

What does a financial adviser mean to you?

For many people, there’s not much difference between a financial adviser and a salesperson. But, this perception couldn’t be further from the truth.

In reality, your relationship with your financial adviser is much more intricate. It’s a partnership in which both parties work together, towards a shared financial goal. A trusted adviser provides helpful, informed recommendations as you plan towards your financial future.

This brings us to the big question: what underpins a beneficial client-adviser relationship? What qualities should you look out for?

At Applewood Independent, we’ve identified three crucial factors from our extensive experience as trusted advisers: 

1) Mutual honesty 

2) Confidence

3) Trust

Mutual honesty

Everyone wants to feel like their money is in safe hands, especially if they’re approaching retirement age. Our role at Applewood Independent is to support our clients to move beyond financial concerns and plan towards a fulfilling future.

However, achieving this requires honesty on both sides of the table. We typically encourage clients to be upfront about their financial objectives and the level of risk they’re prepared to take to get there. 

For instance, if your goal is to retire on £30,000 a year, it’s important to lay out the figures, and your financial adviser will work out:

  1. Whether you’re in the right financial ballpark for that goal
  2. The amount of tax you need to pay 
  3. All the intricate details that need to be tied up in order to achieve that goal

It is then up to us to make the right choices for our clients and help them achieve peace of mind, knowing that their finances are in capable hands.

This leads us onto the next important pillar of a productive client-adviser relationship.

Confidence

A large part of the relationship between you and your financial adviser boils down to the confidence you have in them. Confidence that they know what they’re doing, that they can effectively maintain their portfolios and, above all, safeguard your investments.

What sets us apart from other financial advisers is that we build our own portfolios and we have active insights into market trends. We do everything we can to uncover possibilities that aren’t regularly found by other investors or advisers.

This unique trait – the ability to see value where no one else can – is what instils confidence in our clients.

Trust

A client’s trust in the financial adviser is as important as performance itself. You have to trust that the person sitting on the other side of the table has the knowledge, experience and insight required to safeguard your finances.

This may feel like crystal ball territory as no adviser – regardless of their years of experience – can be 100 per cent accurate on fund management. However, it’s important to trust that your adviser has your best interests at heart and that they can use their experience to benefit you in the decisions they make.

How we get it right at Applewood Independent

For us, Applewood Independent isn’t merely a financial business – it’s a lifestyle. Our approach to investment goes beyond numbers and trends; it’s also about being transparent and aligning your financial growth with your unique risk tolerance. 

After all, successful long-term relationships are built on honesty, trust and confidence in the other party. And the client-adviser relationship is no different. It has to benefit all parties at the end of the day.

If it’s not functioning properly, then it may be time to consider a divorce.

I hope this has been useful to you, and if you have any questions about your relationship with your adviser, I’d love to hear from you. Feel free to get in touch by emailing me at alex@applewoodindependent.co.uk for more information.

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.