When investment funds under perform

When investment funds under performWhen investment funds under perform, some investors are more patient and tolerant than others.

Over a third of UK investors would apparently give an under performing investment fund longer than a year to turn things around.

This is according to a new survey of investors as part of the Legg Mason 2016 Global Investment Study.

Legg Mason spoke to more than 5,000 high-net worth investors in 19 different countries to get their views on a range of investing topics.

They discovered that nearly two-thirds of UK investors aged 40 or over would sell a fund within a year of it starting to under perform.

Within that group of investors, 44% would sell the under performing investment fund within six months.

Nearly a third of investors would give the under performing fund just three months before waving goodbye!

If this seems impatient, then younger investors had even shorter time horizons.

Looking at millennial investors, who are aged 18-39, only 14% were prepared to hold an under performing investment fund for more than a year.

Overall, the most common period for holding onto a poorly performing fund was 3-6 months, which was cited by 35% of UK millennials.

Globally, the most common period for holding an under performing fund was just 1-3 months.

When it came to broader market volatility as an influencer on investment behaviour, both millennials and older investors showed more patience.

Older investors said they would tolerate a 16.7% decline in equity market valuations before re-evaluating their allocation to stocks.

They would on average tolerate an 18.6% fall in equity values before selling this part of their portfolio.

Millennials were even more inclined to hold their nerve when markets fall, evaluating their equity exposure after a 20.3% fall and selling after a drop of 23.3%.

According to Adam Gent, Head of UK Sales at Legg Mason:

“The survey reveals an interesting dichotomy between investors’ attitude to market falls and their approach to funds that underperform in the short-to-medium term.

“On one hand, investors seem willing to tolerate reasonably steep market declines before re-evaluating their equity exposure, but only a third will give a fund a year to turn performance around, and 44% just six months.

“It could be argued that this is insufficient time given that many funds have rolling return targets that stretch over years not months, which perhaps emphasises how important it is that investors understand what they hold and under what conditions they are likely to underperform.

“Investors with a firm grasp of their underlying funds, either directly or under the guidance of an adviser, are those who tend to avoid the classic investment mistakes and perform better over the long term.”

When investment funds under perform

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7 things people miss about working when they retire

7 things people miss about working when they retireRetirement is the dream for many people; leaving behind the stresses of work and enjoying plenty of leisure time.

With rising life expectancy, more people expect to continue working during retirement.

This isn’t always for financial reasons, with the desire to stay active and have purpose often prompting a continued career in later life.

A new online poll by Skipton Building Society of over 2,000 Brits has found that more than half expect to continue working during what might have previously been viewed as a traditional retirement.

18% of those who expect to continue working plan to stay in full time employment and one in four plan to work on a part time basis to boost their income in retirement.

Those who can afford to retire might not choose this option.

The research found that the average retiree gets bored of not working after only ten months and will then look for other ways in which to fill their time.

A third of people plan to help others in retirement, and one in six will use their skills from previous careers to help communities through volunteering.

A fifth of people who say they will be too busy in retirement to enjoy that newly found leisure time, as they will be responsible for childcare for their grandchildren and even caring for elderly parents.

According to Andrew Sheen, editor of Retiresavvy.co.uk:

“You often hear younger people talking about their aspirations for later life, their dreams of travelling the world and enjoying a relaxing retirement.

“But as they get older they realise this isn’t always going to be the reality for them.

“For some, this is a choice – but for others it is not, and their hands are forced by financial or personal circumstances that prevent them from stopping work, no matter how much they’d like to.

“For others this new reality can be simply due to wanting to help out family members, or because the retirement boredom has set in.

“But what is clear from our research, is that retirement is what you make of it, be it relaxing, volunteering, supporting the family or even going back to work – and planning ahead is key.”

Retiresavvy.co.uk from Skipton Building Society came up with 7 things people miss about their work when they retire:

1. The workplace banter and colleagues

People are social creatures and the workplace is usually the most social place we know.  Over half of retired Brits (54%) felt the retirement glow wore off because they missed the camaraderie they had at work, while 62% of retired women and 44% of men admitted they missed the banter they shared daily with colleagues.

2. The job title (and the feeling of importance that goes with it)

Lots of people define themselves by what they do for a living and get self-esteem from their job title – even carrying this over into retirement. Job titles give structure and meaning to people’s place in society, so it’s hardly any surprise that some people feel a loss of self-worth when they give up work – this can be particularly the case for men in more senior positions.

3. The stress and satisfaction of a job well done

Work can be stressful at times, but with that often comes the satisfaction of a job well done, which can be lacking in retirement.  Four in ten felt in retirement their mind was no longer being pushed and still felt capable of completing a full time job.

4. The routine of a 9-5, five days a week

People might hate the drudgery of the 9-5 workday, but it’s ironic that in retirement, more than a third of respondents said they were fed up that every day ended up being the same as the last, while one in five felt completely redundant. Loneliness, boredom, and the feeling of ageing quickly were all cited as reasons why retirement wasn’t as enjoyable as they had imagined.

5. Time away from the other half

Going from working a full week plus commuting time to spending all your time at home can be a strain on relationships.  Four in ten couples find it impossible to live with each other during retirement as they’re just not used to spending so much time together after working for so long. Many couples struggle to fill the hours with so much spare time, and probably argue more as a result; in fact, 11% say they disagree about how they will spend their day.

6. Being kept busy and out of the house

Say what you like – but work does at least keep you busy during the day. Skipton found that a fifth (19%) of retirees thought daytime television was ‘awful’, a quarter (24%) said the great British weather stopped them getting out and about as much as they would have liked, while about one in seven (14%) were taken for granted a little by family, as it became expected for them to run around after children and grandchildren.

7. Salary!

Most people’s incomes take a hit in retirement as they move from a monthly wage to living off a pension or other retirement salary.  A third of retirees (31%) struggled to cope without their monthly wage packet – making it all the more important to have good pension plans in place before leaving work.

What will you miss most about work when you retire?

7 things people miss about working when they retire info

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Are you a financial procrastinator?

Are you a financial procrastinator?I’m an expert procrastinator.

When something needs doing, I can quite happily fill my time with inane tasks until the pressure of a looming deadline forces immediate action.

When it comes to my personal finances though, I am reasonably disciplined and rarely avoid tackling money management head on.

It would seem though that we are a national of financial procrastinators.

According to some new research, we spend more time organising our music collections, photo albums and wardrobes than we doing reviewing our pensions or long term savings plans.

The product provider Standard Life Savings found that, over the course of a typical year, UK adults spend on average just under seven hours sorting out their music libraries.

In stark contrast, they spend just four and a half hours reviewing their pensions.

Over half of people don’t review their pensions at all.

Those that do review their private pension arrangements do this only once every nine months.

They also found that of those people who have lost their pension details, 20% seem unconcerned and are happy to live in blissful ignorance.

This lack of long-term financial planning was accompanied by procrastination over day-to-day budgeting.

Only 57% know the exact balance of their current account and 40% put off their budgeting in preference of doing other things.

Only a quarter of people regularly set aside the time to review their personal finances and many are attempting to simultaneously stay on top of their money management while multi-tasking or watching TV.

Five ways to avoid being a financial procrastinator

Standard Life Savings have come up with five tips to help establish a savings mindset:

  1. Track your spending – Track your spending habits and get to know exactly where every single penny is going. You may find an online dashboard to make this easier. It’s only by reviewing where your money is being spent that you can make decisions about whether you wish to continue spending at the same rate on the same things.
  1. Set yourself a proper budget – Having tracked your spending, you need to set yourself a realistic budget so you have precise control over what you have to pay and how much you can save and spend. Once you have paid your necessities and put money towards your savings goals, the remaining money is yours to do with as you please.
  1. Beware of impulse spending – Start using the “Need or Want” strategy. Before you spend anything, ask yourself, “Do I really NEED this, or do I just WANT it?” You may find that many of the things you purchase were bought on impulse so if you’re not sure, make yourself walk away and come back in a few hours. You can also use the “how many hours would I have to work to afford this?” test – that can quickly help you decide if you really do need it or not.
  1. Get organised with bill payments – Managing bills can be a financial challenge. Rather than missing a deadline and being hit with charges, set up monthly direct debits for utilities. It can also be useful to pay as many other bills as possible on a monthly basis – but check first that this won’t incur higher interest payments. With fewer bills to actively manage each month, it all becomes easier. But make sure you regularly check payments are being made ok and that totals balance out at the end of the year too.
  1. Plan for the long term – People often don’t plan how they will save for their future, perhaps because something like retirement can seem so far away and the planning a bit overwhelming. The reality is that while it may take time to find out what you need to know and to get organised, it’s not as hard as you might think. You can do lots of your planning online these days, so make sure you sign up with your pension provider for an online account – they may even have an app to help you keep up to date. There are calculators and guides available online to make the process easier too. And if you feel you need more support, and then don’t forget you have the option of seeking guidance or advice when you need it.

Do you suffer from financial procrastination? How do you avoid being a financial procrastinator and stay on top of your money management?

Are you a financial procrastinator?

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Weekly Round-Up – Saturday 14th May 2016

Weekly Round-UpFriday 13th, unlucky for some, especially if you live or work in Cranleigh and need to use an Internet connection!

We had to cope with a major failure at the local BT exchange yesterday, taking the office offline for the entire day and leaving the team cleaning windows and assembling furniture instead!

Here are some of the other things that we got up to at Informed Choice this week.

On the blog this week

Women suffer more from losing a partner

Moving in with parents after a break up

Generation Inflation debunks silver inflation phenomenon

Dragging a tyre around a marathon

The latest podcast episode

Should you sell in May and stay out of the equity markets until St Leger Day?

Martin examines this old investing adage in the latest episode of the Informed Choice Podcast.

Before you go

What happened when a swam of 15,000 honeybees turned up outside of office last Friday morning? Martin was straight on the case and arranged for a registered swarm collector to rescue as many as possible.

Here’s the story in the Surrey Advertiser, complete with video and photographs contributed by Martin.

Bee swarm in Cranleigh

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Podcast 082: Sell in May

Podcast 082: Sell in May

In this episode of the Informed Choice Podcast, Martin talks about selling an investment portfolio in May and staying away from the equity markets until after a horse race has finished.

There is also a roundup of the latest personal finance news and an update from the world of Informed Choice.

Subscribe in iTunes | Click to listen now | Right click to download episode

Podcast 082: Sell in MaySell in May

You might have heard investors and commentators talk about the old adage ‘Sell in May and go away, come back on St Leger Day’.

This is based on a theory that November to April is has significantly stronger investment growth, on average, than May to October.

So if you follow the sell in May strategy, you would sell your equity holding at the start of May and keep that money in cash over the summer months, before reinvesting it after St Leger Day.

St Leger Day refers to the St Leger Stakes, a flat horse race in Doncaster, which takes place each year in September.

So does this investment theory stack up? Should you be rushing out to sell your investments in May and keeping them all in cash until after the last of the British Classic Flat Races?

In this episode of the Informed Choice Podcast, Martin examines the research and shares his thoughts on whether this investing strategy make sense.

Right click here and save as to download this episode to your computer

Personal finance news update

-Payday lenders will no longer be able to advertise their services on Google, as the search engine giant attempts to limit what it calls a ‘harmful’ industry.

-The number of people looking for a new home to buy has fallen to its lowest level since 2008, according to a survey by the Royal Institution of Chartered Surveyors.

-UK industry has slipped back into recession for the third time in eight years, according to the Office for National Statistics.

-Tens of thousands of property purchases fall through between offer and exchange of contracts each year, as the average time it takes for property lawyers to progress to this stage takes just shy of three months.

-Only 1% of people know all of their loved ones’ funeral wishes.

-Adults in the UK spend more time organising their music collections, photos, and wardrobes, than they do reviewing their pensions and long term savings plans.

Useful links mentioned in this episode

Cranleigh Parish Boundary Challenge

The Tyre Lady

Florilegium exhibition at Cranleigh Arts Centre


The Financial Wellbeing Podcast

Get answers to your personal finance questions

Do you have a personal finance or investing question for Martin?

Email martin@icfp.co.uk or ask on Twitter @martinbamford.

You can call our dedicated podcast voicemail line on 020 8144 2745 with your question or visit www.speakpipe.com/InformedChoicePodcast to leave an online voicemail.

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ICP082- Sell in May

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Women suffer more from losing a partner

Women suffer more from losing a partnerWomen are more likely to suffer the financial and practical implications of losing a partner, according to new research.

Royal London’s Losing a Partner report found that half of bereaved women reported lower household income compared a third of men.

Women also reported lower disposable income as a result of bereavement than men.

According to Royal London, the financial impact of bereavement leads to a wide variety of responses, with women again more likely to report having to take action.

They found that four in ten women had to cut back on discretionary spending such as holidays, compared to a third of men.

Women were more likely to draw on savings or take out a loan, and more likely to spend less on household bills (including utilities) and less on everyday items.

One of the more extreme financial impacts following the loss of a partner was downsizing or moving house.

While just one in ten men downsize or move house, two in five women are forced to move home following a bereavement.

The practical impacts are a consequence of the tendency of all couples to split household tasks between them, often along traditional lines.

Royal London’s research found evidence of this traditional approach to splitting household tasks, discovering that bereaved men were overwhelmingly likely to say that their partner took charge of cooking, cleaning, washing and ironing before they died.

In comparison, bereaved women said that their partner had taken charge of car maintenance, dealing with tradespeople, DIY, driving and technology.

The sudden loss of this expertise leaves the surviving partner having to deal with these practical matters for the first time, while also coping with the emotional loss.

Overall, one in five women surveyed said they had made five or more financial changes, compared to only one in ten men.

The financial impacts for both sexes last longer than expected, with a quarter reporting lower disposable income in the first year after bereavement, rising to two in five people one to three years after.

Even three to five years after losing a spouse or partner, around a third still report lower disposable income.

Although losing a partner affects everyone, those reporting the least impact were those with the most plans in place.

Those with specific plans in place, including life insurance, funeral plans and lasting power of attorney, were least likely to report reduced disposable income, lower savings or increased debt.

Simon Cox, spokesperson at Royal London, said:

“The research shows a clear bereavement gender divide, with women faring the worst.

“While we can’t prepare for every eventuality, and as difficult as it may be to talk about dying, having plans in place will help loved ones left behind be more financially secure and manage the everyday chores and tasks.”

Here at Informed Choice, we are able to model the financial consequences of the loss of a partner by building ‘disaster scenarios’ into the lifetime cash flow forecasts we create for our clients.

This modelling of disaster scenarios is a very effective way to graphically illustrate how the death of a partner would impact household finances in the future.

Whilst talking about death is never easy, it is very important and raising the subject as part of the creation of a Financial Plan can make it easier.

Women suffer more from losing a partner

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Moving in with parents after a break up

Moving in with parents after a break upThe term ‘Boomerang Generation’ is in common parlance, with many young adults choosing to share a home with their parents after previously living on their own.

New research from Churchill Home Insurance might have coined a new phrase to describe those adults moving back in with their parents following a break up, divorce or separation.

This might be as many as seven million UK adults, who are described as ‘Doomerangers’.

If the numbers stack up, it means as many as 14% of the adult population have been forced to move back in with their folks following the end of a relationship.

Rising rent and mortgage costs are no doubt contributing to their phenomenon,  with many adults unable to afford the costs of separate accommodation as a single person following a breakup.

Churchill found that financial reasons were the leading cause for Doomerangers moving back home with parents, with more than half of those surveyed doing so because they couldn’t afford the alternative.

Adults are also moving back home after a separation because they need parental emotional support, help with childcare or distance from their ex-partner.

According to Martin Scott, head of Churchill Home Insurance:

“A separation or divorce is an emotionally traumatic experience and sometimes parents are exactly what we need to help us get through these difficult periods in our lives.

“The additional financial strain of having to keep separate properties often means it’s easier to move in with family, rather than try and find somewhere else to live.”

They found that men are more likely to move back in with their parents than women.

While men are mostly becoming Doomerangers for financial reasons, women predominantly move home as a temporary measure while searching for somewhere new to live.

The financial reasons for people ‘doomeranging’ back to their parents vary, according to the research.

They range from the high cost of rents elsewhere to needing to reduce the cost of living or having to repay debts.

Clearly going through a break up, separation or divorce can be a very challenging time, especially when it comes to personal finances.

Working with an Independent Financial Planner at an early stage is a good way to remove the financial stress of a separation and create a clear vision for the future.

Moving in with parents after a break up Pinterest[/tweet_dis_img]

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Generation Inflation debunks silver inflation phenomenon

Generation Inflation debunks silver inflation phenomenonWe all experience price inflation differently.

The official inflation figures, published each month by the Office for National Statistics, provide a useful average, but hide a range of real life experiences.

We have often seen people in later life experience a higher rate of price inflation than younger people.

This phenomenon is known as ‘silver inflation’ and reflects the nature of the goods and service typically consumed by older people, which tend to rise faster in price.

Despite widespread acceptance of silver inflation, and the importance of planning for this when creating an income in retirement, younger people might now be facing a similar challenge.

According to new research from Fidelity International, millennials suffer greater inflationary pressures than any other generation, with their actual inflation rate three times higher than retirees and almost double the UK’s average inflation rate.

Millennials are the cohort who reached young adulthood around the year 2000, at the turn of the millennium.

The analysis from the first of Fidelity International’s generational inflation series digs deeper into the real inflation rate facing different generations across the UK.

In the 12 months from March 2015 to March 2016, under-30s suffered a real inflation rate of 0.9%, compared to 0.4% for both the Gen X (30 – 49 years old) and Baby Boomer (50 – 64 years old) generation, and 0.3% for those over 65.

According to Fidelity, this has been the trend since September 2014, with other generations tracking the average UK inflation rate more closely.

Fidelity explain that the under-30s spend proportionally more on dining out, smartphone and Internet subscriptions, rent and household bills.

However, education is their biggest weekly expense and this is significantly driving up their average cost of living.

Millennials prefer spending on unique experiences, so unsurprisingly a bigger chunk of their income (14%) is spent on dining out and experiences with only 8% spent on groceries and soft drinks.

Consequently, this generation has not benefited from the massive fall in UK food prices driven by the ongoing supermarket discount price war.

The younger generation also spend proportionally more on housing (19%) than any other generation, battling the high cost of renting and the struggle to get a foot on the property ladder.

In contrast, retirees (those over 65) spend a bigger slice of their income on categories that experiencing lower inflation like food and non-alcoholic drinks.

Indeed, the spending of this group is the mirror image of those under 30 with no education costs and less spent on dining out.

According to Maike Currie, investment director for personal investing at Fidelity International:

“The headline inflation rate tells only half the story.

“On the surface it may look like the cost of living has barely increased over the last year, but scratch beneath the surface and there is a clear generational divide when it comes to the cost of living.

“Millennials can be dubbed ‘Generation Inflation’.

“Our analysis shows the current rate of increase in the cost of living is three times more for millennials than it is for retirees, with those under 30 spending a greater proportion of their income on the areas which have suffered the highest price increases – education and housing.

“This leaves them with little left to save and the challenge of generating higher returns to keep up with the pace of inflation.

“Unfortunately for millennials this challenge is being met with equally low wage growth – wages remained below their pre-crisis average in 2015 despite unemployment falling back which means this group is also hit by negative real earnings growth.”

This research from Fidelity International is an important reminder that official price inflation figures should only be treated as a starting point when making assumptions about price changes in the future.

When constructing Financial Plans for our clients, we always consider what would be a reasonable inflation assumption for the future, based not only on past experience of price inflation but on the types of goods and services consumed by that specific client.

Price inflation erodes our purchasing power, especially over long periods of time, making it important to factor in a reasonable assumption and consider how inflation might impact upon our ability to achieve our goals in life.

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Dragging a tyre around a marathon

Dragging a tyre around a marathonRunning a marathon is hard work.

Distance runners often talk about ‘hitting the wall’ during a big race. This is a physiological symptom which happens when your glycogen stores are depleted. It’s not much fun.

Add to that blisters, pulled muscles and nipple chafing, and many people would question why running for 26.2 miles is something any sane person would choose to do.

In terms of a challenge, there’s a world of difference between running a road marathon and running a trail marathon.

Road marathons, such as London or Brighton, are usually relatively flat. The surface underneath your feet is level and the course well marked.

Moving to the trails, the marathon runner faces a different set of challenges; tree roots, exposed rocks, steep hills (up and down).

Yesterday was the second annual Cranleigh Parish Boundary Challenge, an event we are pleased to sponsor here at Informed Choice.

For the first time this year, we added a trail marathon distance option for runners, which attracted a field of around 20 hardy souls, prepared to tackle some big hills and overgrown paths on what turned out to be an unseasonably warm day.

One of our entrants made that challenge of completing a trail marathon even tougher, by dragging a car tyre around the entire course behind her.

Meet The Tyre Lady.

Dragging a tyre around a marathonRima Chai, also known as The Tyre Lady, is on a mission to complete 100 marathons dragging a tyre, all before the year 2020.

The Cranleigh Parish Boundary Challenge was her 60th such marathon, all designed to raise awareness of some important environmental issues.

This includes to get communities to consciously reduce their single use plastic by other means over recycling because, as she says, currently we are pretty “rubbish” at recycling plastics.

In my current state of fitness, I can’t imagine getting round the 26.2 miles of the Cranleigh Parish Boundary Challenge in a respectable time.

I definitely wouldn’t be able to do it dragging a tyre the entire way.

Well done to everyone who completed the Cranleigh Parish Boundary Challenge yesterday and, in doing so, helping to raise over £1,000 for Cranleigh Rotary Youth Project and to enable them to send children from St Joseph’s Specialist School to the Chessington World of Adventure.

St Joseph’s Specialist School caters for children between the ages of 5 – 19  with moderate, complex and severe learning difficulties; it’s a fantastic local organisation to support.

Dragging a tyre around a marathon

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Weekly Round-Up – Friday 6th May 2016

Weekly Round-UpHappy Friday, readers! It’s time to catch up.

Here are some of the things that we covered at Informed Choice this week.

On the blog this week

Are Brexit fears hurting investor sentiment? Wealth managers think they could be.

The Peter Pan Generation are costing their parents £1.2bn a year. Find out why this matters for your retirement planning.

In our latest monthly investment update for May 2016, we look at how the investment markets, global economy and commodity prices are behaving.

May is Stroke Awareness Month and new research has identified financial protection has become a lower priority for many families.

The latest podcast episode

In the latest episode of the Informed Choice Podcast, Martin talks about a big night at the Toast of Surrey Business Awards 2016 and Nick appears on BBC Radio 4’s Money Box Live.

Before you go

Only a handful of tickets are left for The Big Cranleigh EU Referendum Debate, sponsored by Informed Choice, next Friday lunchtime.

Reserve your free ticket for the event before they all go. What promises to be a robust debate is being chaired by Anne Milton MP and will feature a confidential exit poll to determine voting intentions.

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