Included in this edition of our e-newsletter …
Happy New Year to you! I hope that you have had a good, restful and Happy Christmas. We start the New Year on a positive note and it gives me great pleasure to announce that the funds we manage have for the very first time now broached £200million, thanks to our clients, our hard-working and loyal staff and our investment choices on behalf of our clients! Let us trust that the positive backdrop we now have proves to be very rewarding for everyone and for all those especially who have been so patient these last few trying years. As ever though, it is always best to be invested before things become clearer as then the prices people pay are not so attractive! Indeed, apparently since the Election one of the reasons certain investments have been rising is that billions have started to flow back in again – it’s not too late – don’t miss the boat!
You will recall that recently we were proud to be noted as one of the Top 100 financial advisers in the Country as allocated by a prestigious trade magazine. However, what was interesting is that in arriving at its conclusions, the editorial team did not just look at numbers of clients, funds managed, turnover or things like that but also how diligently the firms help their clients and examples of the degree of service quality being provided. Of course, it is still very much subjective but the cases they chose all demonstrated that ‘extra bit’ backed by competence, professionalism and care. You’d think that such basic principles pervaded all firms but clearly that is not true at all and there are still too many financial salesmen out there who sell products for the income they will enjoy as a consequence rather necessarily than what may be best for the client. No, it may not be ‘commission’ but it can be the chunky fee for proceeding with a proposed investment for example. The awarded advisers go beyond the call of duty so often too – helping in care situations, cases of divorce and ill health and plenty of administrative tasks which can be very time consuming but not necessarily financially remunerative to them too.
A year-end gives us opportunity to reflect on what funds were the best (and worst) over the last ten years. It is good to see some of the top areas well represented within our strategies, such as UK smaller companies and Henderson’s Smaller Companies Investment Trust – which we have now just sold in full. We also have a good representation of Japan which did very well also. On the losers’ list are metals and mining trusts but curiously, these did badly because they started so high – they were the darlings of investors at the time and we avoided them but started buying and added more and more the cheaper they became and generally we have done extremely well in these in a great bounce from the bottom. We missed-out a little on the mainstream technology sector but of course that is also why our smaller company exposure did so excellently don’t forget – minnows becoming whales! As ever, it is what is best for the next ten years which counts – and what we avoid and there are plenty of ‘expensive’ sectors we don’t like!
Let me now play with some maths and the basic principles of risk for you. Let’s say that ten years ago you started with £10,000 and being risk averse, you put £500 into twenty different investments, so a pretty good spread with a range of expectations from racy to dull. Let’s say that on two you lose the lot – how much? £500 twice (in reality with such collective funds the likelihood of that happening, as they spread the risk too, is almost non-existent however). Let’s say on another two you lose half so £250 each for a 50% drop. Let’s then say that on another, it happens to be that Henderson Smaller Companies Trust mentioned above. It has gone from £500 up to £3,600. Let’s say the other seventeen did a fair-to-middling 7%pa each (which happens to be around the long-term ‘norm’ for equity-style assets, a combination of inflation, dividend yield and economic growth). Now, many investors spend an unhealthy amount of time on the bad ones and they take irrational decisions and at the wrong time as a consequence but overall, on that ten year outcome, despite two of those holdings losing everything and another two halving, the overall pot grew by £9,000 – and that would not be so ‘remarkable’ but just a pedestrian ‘what is possible’. And the person taking ‘no risk’? The lost opportunity they suffered means that the Building Society Cash ISA may have just generated a return of say £1,500 – less even than inflation and a loss of £7,500 over the simple, well-diversified alternative. I hope it makes you stop and think!
And remember, as your investment manager we are doing just that, taking decisions of what to buy and sell and when. We may well have sold-out on the one which has rocketed too fast to buy something else during that time (like we bought into very depressed miners at the trough) – sitting on something for ever without a ‘reason’ is never a wise idea as something awful can happen (e.g. Woodford which we avoided totally?) – keep spreading your eggs around even if you miss some of the best, top performances. Remember there is an adage (perhaps first coined by rather successful John P Morgan of US Investment bank fame) when asked how he accumulated his fortune – ‘selling too soon’. And no, you don’t have to take an ‘all-or-nothing’ approach either. If you have never tried investing aside from ‘cash’ – put some in one of our pots to see how it works and build your experience and confidence like that.
It has been pleasing to again be nominated for awards! The City of London Wealth Management Awards (COLWMA) 2020 have nominated us for three categories! These are:- Best Advisory Service, Best ISA Provider and Best SIPP Provider. We are humbled! Thank you, clients and staff, for helping to make this possible as without either, we should not be able to do what we do. However, it is always great to be acknowledged as otherwise we assume everyone else out there advising is as ‘good’ as we try to be whereas inherently that cannot be the case… Still, we always accept comments and criticism if there are any failings so we can put them right and are always looking at improving what we do too, so that our client proposition continues to improve.
I touched briefly upon this before but the German Bank charging small savers to look after their money (!) is a cooperative bank owned by its members and with €1.8billion of assets called Volksbank Fürstenfeldbruck, just thirty miles from Munich. Now if you thought that holding cash on deposit with a British Bank or Building Society would never see negative interest rates so you end-up paying the Bank to look after your funds, your ISA or whatever in which you keep your cash, that’s what the people in Bavaria thought too. The charge being levied? 0.5%pa and it applies to everyone, even if you only have €1 on deposit. The ECB introduced negative rates in 2014 to try to stimulate the Eurozone economy but they have been especially controversial in Germany. If you have too much cash on deposit, why don’t you put it to better work for yourself anyway – there are plenty of extremely attractive investments out there which also diversify your financial exposure and spread the risk tremendously as well.
It is interesting – but also sad – that the media and populist commentators on Social Media, constantly harp-on about ‘how bad its is’. Of course if you are that individual for whom some misfortune has befallen you then no amount of positive information helps but that is different – it always is. We should instead be cheering that globally; absolute poverty has fallen below 10% for the first time ever – it was 60% in 1958 for example. Global inequality is plunging due to rapid economic growth in Africa and Asia with child mortality at record lows too and famine is a rarity aside from conflict zones. Indeed, humans are living more sustainably too and it is believed that the average UK person’s consumption peaked in about 2000 as the quantity of resources consumed per person has fallen by a third from then (to 2017). Economic expansion explains some of that – technology has replaced so many individual pieces of equipment which we used to need separately and is now all encompassed in the ‘Smart Phone’, so it is helping with the green revolution even if we can all still cut-down on waste. Energy efficient light bulbs consume less energy and we use 65% less land to produce a given quantity of agricultural produce than we did fifty years ago and that descent is accelerating globally despite some extreme problem areas of course but in richer countries, their forests are returning and the large animals connected to them. (Excerpts from Matt Ridley’s piece in ‘The Spectator’).
One of our readers thought the attached might be a fitting tribute to the Firm – another ‘One of the Best’. I share it now that we have broached £200million! This was Milton the legendary show-jumper. https://www.youtube.com/watch?v=6pxwYCURa3U. Thank you – that is very kind of you!
Do money woes cause you sleepless nights? Apparently for one-in-three that can be a problem according to a recent survey. https://www.financialplanningtoday.co.uk/index.php?option=com_k2&view=item&id=11125:money-woes-cause-sleepless-nights-for-1-in-3&Itemid=468&utm_source=newsletter_1993&utm_medium=email&utm_campaign=ex-ifp-ceo-cann-wins-new-year-s-honour-young-women-opting-out-more-than-men-altmann Some of this is simple – if you spend too much then think about what you can reduce. Do you need to start budgeting to meet known bills so that you know how much you have left to spend on other things? Do you have some silly and unnecessary outgoings you need to curtail (for example monthly subscriptions or memberships you don’t really need)? Most importantly though, be honest with yourself. Part of that too may be being brave enough to go and see someone to chat through your finances with them – and you MUST be honest. Whilst you might not have any money to invest and may feel you don’t need financial planning help (or can’t afford that, if it proves it could be helpful), we offer free-of-charge reviews with you and that time expended could be the best investment you ever make in your life – and help you sleep.
Stock market investments can offer income through the payment of dividends and interest and good opportunities for capital appreciation over the longer term. By this, generally we mean periods in excess of five years, preferably much longer. However, we can never promise you particular returns, especially in the short-term. At any point in time but especially in the short term, your capital could be worth less than the original amount invested as some of the selected holdings may fall in value, regardless of expectations at the time of acquisition. We may also invest in funds that hold overseas securities. The value of these investments may increase or decrease as a result of changes in currency exchange rates. Returns achieved in the past cannot be relied upon to be repeated.
To remind you, why do I send out occasional emails? Because everyone can save money. We have no connection with any companies mentioned and you have to make your own contacts and satisfy your own enquiries. What is in it for us? If we can prove that we are knowledgeable and that our service and advice have good value, then you might contact us for professional financial planning and investment help. You don’t have to do that though and there’s no charge for emails. If simply they save you money, then accept them with our compliments! However, you’ll know where we are!
If you have any queries of any form or indeed any subjects you think I could include, please contact me. I also refer you to our website www.miltonpj.net. We celebrated our thirtieth anniversary in 2015 and have been publishing a well-respected independent column in the local Paper for most of that time and free client newsletters as well.
Do not forget however the usual caveats – this is not ‘advice’ and you are encouraged to seek that before embarking upon any financial route involving investments, etc.
My best wishes
Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers