Inflation and the cost-of-living crisis are taking their toll even on the wealthy, leading investors to think outside the box to secure outperformance, improved dividends and tax-advantaged returns.
Investors consider taking AIM for dividends
Investing in the kind of early-stage and high-growth companies to be found on AIM does carry particular risks, but can also open up opportunities for outsize returns, not to mention the potential for tax savings tooMeanwhile, expertsii are predicting that the junior AIM market will regain its previous dividends highs in 2023, a full two years before the main market, in another signal that investors should perhaps be looking beyond the FTSE for higher growth. Approaching £7bn of IPO and follow-on capital was raised on AIM in the first three quarters of 2021, a record since 2007, and the junior market accounted for 52% of all equity capital raised on Europe’s growth markets. Seeing such figures in the press has certainly got our users thinking. Investing in the kind of early-stage and high-growth companies to be found on AIM does carry particular risks, but can also open up opportunities for outsize returns, not to mention the potential for tax savings too. It may be well worth having a conversation with an adviser to see if AIM investments could have a part to play in your portfolio.
i AJ Bell
ii Link Group
Va-va-voom around VCTs too
Many people may be hunting for dividends, but our conversations with investors are showing that many people are only too aware that the government has them in their sights tooVCTs are on track to have seen double the amount of investment in this tax year compared to the previous one, a trend no doubt bolstered by the wild success of “unicorn” VCT-backed companies like Zoopla and Gousto. The story is far from running out of steam, however, with a raft of new vehicles being launched last month. VCTs, like other tax-advantaged investments like the Enterprise Investment Scheme, are a complex area from both a risk management and tax reporting perspective, but they could play a valuable role in your strategy. Why not speak to a professional to see where they might fit?
We’ve been having a markedly increased number of conversations about investment performance since the start of the year, and investors are now also bringing up AIM, VCTs and EIS investments more and more too off the back of positive media coverage. While main market, blue-chip stocks should maybe make up the bulk of your portfolio, it is well worth exploring what these investments could add to your strategy.
These are more complex from a risk management and tax reporting standpoint, however, so we would urge investors to always take professional advice in these areas before diving in. Wealth managers can provide vital help with due diligence, and in introducing specialist investment providers too, so why not have some no-obligation discussions to see what leading advisers do?
Even the wealthy are fretting about their financial wellbeing
There is a common misperception that the affluent don’t suffer from money worries, but really nothing could be further from the case. Expenditures and financial commitments tend to grow in line with one’s income, and we commonly encounter users of our site who have suffered a business or professional setback and suddenly outgoings like private school fees (which have been rising exponentially) are taking a real toll.
The cost-of-living crisis is affecting everyone – and arguably the wealthy even more so as the items (like school fees and high-end properties) which they spend most on are even more sensitive to inflation and overheating markets than the basics. Little wonder then that across the board, 57% of Britonsiiisay that money worries are affecting their mental health.
The cost-of-living crisis is affecting everyone – and arguably the wealthy even more so as the items (like school fees and high-end properties) which they spend most on are even more sensitive to inflation and overheating markets than the basics
Currently, a fifth of people in the UKiv say that they would raid their pension pot if they could, something which would likely be a terrible idea amid calls for the State pension age to be raised to 70 to help avoid a government funding chasm. More positively, 73% have resolved to make this year the one where they finally sort out their finances for good.
Inflation is now at a 30-year high, which needless to say makes this task much more difficult. But there is nothing to be gained from burying one’s head in the sand. Your first task is to ensure that your money is at least keeping pace with the rate of inflation, which means leaving excess cash at derisory cash interest rates is self-defeating in the extreme.
iii Schroders Personal Wealth
iv Scottish Widows
Can your financial strategy be improved?
Money worries might be pretty much universal at present due to inflation, the threat of tax rises at the next Budget and more, but nothing was ever solved by ignoring concerns. We can say with certainty that nobody ever regrets taking a little time to see if their financial strategy could be improved.
Why not use our fast and free matching service to explore your options? You have nothing to lose and potentially a lot to gain – not only in terms of enhanced returns, but reduced stress levels too.
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.