Inflation volatility is a concept we may all need to become very familiar with, and creative portfolio construction is looking like the order of the day.
As ever, we are encountering a range of issues driving people to seek wealth management advice at present. Equity investment themes continue to be a key driver however, as the landscape shifts beneath our feet.
Income investors have been hit hard by the pandemic, with UK-listed firms almost halving dividends during 2020 and even the most reliable companies slashing previously robust payouts. The outlook has now worsened further, prompting many of our users to seek advice.
According to Link Group’s Dividend Monitor, the first quarter of 2021 saw dividends from London-listed names fall by 27% year over year (a massive £12.7bn). What is more, the firm does not expect dividends payouts to bounce back to pre-pandemic levels until at least 2025.
Faced with another four years or more of scanty dividends, income investors are rightly questioning their portfolio holdings
Faced with another four years or more of scanty dividends, income investors are rightly questioning their portfolio holdings. Mining stocks riding the commodities boom, along with financials to a lesser extent, are often being touted as pockets of hope for investors who rely on dividends as an important income stream (as many in retirement do). However, we would always advise looking at portfolio composition in the round before making any big decisions.
News that the Government is introducing a guarantee scheme to help banks bring back 95% mortgages was met joyously by those struggling to get onto the property ladder. However, it was quickly pointed out that many of the rates on offer for such mortgages are unattractive and there are often restrictions in place.
Quite a few of the conversations we’ve been having with High Net Worth Individuals recently have centred on how to free up wealth to help children (and grandchildren) buy a property more cost-effectively. The good news is that there is a lot wealth managers can do to help.
One option might be a Lombard loan, whereby the parents borrow against their portfolio as security. This has the benefit of allowing them to keep benefitting from portfolio gains while still accessing a substantial amount of capital. This is only one type of private client lending facility on offer via wealth managers, however, and you might be surprised what you can achieve for the family with the assets you own. You might also talk to a wealth manager about their private client mortgage facilities and get a personalised deal of the kind High Street banks just can’t consider.
It can be really difficult to know how to position your portfolio with the investment landscape so uncertain on so many fronts. Change might well be advisable, but you should always bear in mind the costs chopping and changing your portfolio entails. These can really eat into returns, not to mention the losses that might be incurred if you make the wrong call. If you would like to check your thinking before making any serious moves, we can help you find professional wealth management advice fast and free.
The importance of investment style in driving investment returns has become an important preoccupation for DIY investors, with this complex topic prompting quite a number of enquiries this month – namely, the shift from growth to value getting attention in the press.
Growth stocks present with strong profits that are projected to be even more so going forward, whereas value investing aims to seek out stocks that are trading below the level their price should be given the company’s fundamentals and prospects. The former has been favoured since the Global Financial Crisis since inflation has been muted and therefore companies’ forward profits not so exposed to inflation. Now, with the inflation threat looming large, many argue that value is to be preferred, and particularly stocks that might be the beneficiaries from interest rate rises in response.
Now, with the inflation threat looming large, many argue that value is to be preferred, and particularly stocks that might be the beneficiaries from interest rate rises in response
Investors are coming to us highly aware that being behind the times in their investment style could be costly, but they are often at a loss as to how to implement the makeover they might need. This is a complex area of stock-picking, so don’t hesitate to take advantage of the guidance we can arrange fast and free.
The enquiries we receive from our users always evidence a huge range of concerns – and ambitions. While equity investment selection issues are front of mind for many currently, these are very much related to financial planning issues.
No investment management challenge exists in isolation. We all invest towards our lifegoals and the erosion of dividends payments is really impacting on the peace of mind of those relying on these payments for their retirement, for instance.
This is one reason why should be wary of taking tips you might read in the press completely to heart, since everything has to be seen in the context of your risk-profile and time horizon. What is good for one investor, might be a terrible idea for another. Seize the initiative if you have a pressing question that you’d like to pose to an expert: we can arrange free, no-obligation discussions with a shortlist of leading wealth managers that will really put you the driving seat.
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.