The secret to winning outside a Casino – let’s see how …
Always looking for inspiration when writing, I had in mind last week to write about some of the more successful investment funds available to investors, but this morning whilst doing some online banking I was informed by my building society that they have great news … as I’ve been with them for more than 15 years I am entitled to a special loyalty saver interest rate of … 1% pa … gross.
You may have realised who I bank with in the UK, and I think they’re a great place to organise my current account; in fact I spent nine years working for them and wouldn’t dream of banking elsewhere. However, is this really what I should settle for when it comes to my savings?
What’s the alternative?
‘I may as well leave it under the mattress!’ … the problem with this is that for 2017 UK inflation was 2.68% … so neither 1% pa from the bank or just leaving it under the mattress will keep the value of your cash safe and provide you with the same buying power in years to come. Over the next few years UK inflation is forecast to be around 1.95% pa (Statista, 25 June 2018). So if you keep your savings in the bank, at 1.95% £10,000 will become worth £9,062 in five years, and £8,212 in ten years… no winners there!
What else can I do?
A new friend I met whilst on an Adriatic cruise this Spring attempted to persuade me to try out the onboard casino, I’ve never been in a casino and who could resist with all those opportunities to win … but my financial mind and the calculation of my chances of winning wouldn’t allow me to throw caution to the wind and so I left my friend to enjoy his evening!
So, what is the secret to winning outside a casino?
When you have studied investments for over 30 years, completed advanced qualifications in Discretionary Investment Management, investment principles and risk, survived the credit crunch and 13 years working in Spain despite the scams and false promises that have placed a shadow on my industry, you develop a nose for solid investments that actually do what they say on the tin!
About three years ago I decided that our clients would benefit from the use of index trackers. We need to show caution in relation to clients attitude to risk. Index tracker funds give a portfolio the best chance of real growth whilst reducing the additional risk taken when choosing a fund that employs a fund manager with the aim of outperforming the index. By incorporating index tracker funds into a portfolio we are able to add diversification and take away the risk of a fund manager underperforming the index.
More recently, I came across an article that read ‘funds that have never lost you money’… I was extremely pleased to see that an index tracker fund we have incorporated into our client portfolios for some time is top. Only two funds in the IA Global sector have managed to make a positive return in every one of the past 10 calendar years, with both of these focusing on healthcare: L&G Global Health & Pharmaceuticals Index Trust being top, with a total return of 256.82% in 10 years (FE Trustnet, 2 May 2018).
But index trackers are only part of a well-diversified portfolio, there are other winners too. For some time I have been a great believer in smaller company funds and microcap funds. In fact, over the longer term these types of funds offer some of the best potential for growth. This morning I read a report ‘The top five UK equity funds since the BREXIT vote’ (Portfolio Adviser, 22 June 2018) in which Microcap and Small Cap funds have come out top. There’s often a perception that smaller companies are more vulnerable than large caps to many Brexit related headwinds, but this is not the case. There are small growth companies based in the UK that are building truly global businesses, and utilising Brexit uncertainty within the UK to accelerate overseas growth.
One of my favourite Microcap funds to include for clients is the Marlborough UK Microcap. The fund typically holds around 250 companies to reduce stock-specific risk and invests in both small and medium-sized companies. Having provided a net return to investors of 371.52% over the last 10 years, this fund takes some beating!
It’s not all about the return!
Of course, great returns like the two funds above will provide a boost to a portfolio. Would we hold just a handful of investment funds that demonstrate great past performance? No, certainly not. We undertake a strict process of asset allocation on behalf of our clients based on our discussion with them and how they feel about the level of risk they are prepared to take together with the need to maintain liquidity and provide income where necessary. It is important to us to know that our clients understand how their money is invested.
Speed Financial Solutions are a highly qualified financial services provider on the Costa del Sol looking after clients throughout Spain and the UK. We provide a discreet and comprehensive service to individuals, and our service is tailored to your needs taking advantage of tactical opportunities as they arise in respect of your investment planning. We seek innovative solutions for our clients and employ our skills, based on many years of experience, to apply tax legislation to our clients’ advantage. Our relationship with clients is built on trust and mutual respect. We are accessible and approachable, and ready to answer your questions, giving you the confidence you want when dealing with a sensitive issue such as discussing your pensions, investments and savings.
Our Principal, Andrea Speed, is a Fellow of the Personal Finance Society (PFS) which is the professional body for the financial planning community. The PFS is part of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.
Along with a Fellowship, Andrea is a CII Chartered Financial Planner specialising in Taxation and Trusts.
Please take a look at our website – www.speedfinancialsolutions.com for further information and contact us (Tel 951 315 271 or 951 318 529) – we are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation. Follow us on Facebook for regular updates.
Andrea J Speed FPFS (DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
25 June 2018
Please note that the above does not constitute advice to invest – you should seek independent financial advice before investing.