Q: the recent volatility in the markets has caused downward pressure on my entire portfolio of investments. In short, I have lost money. Are there any steps I should take to protect my investments?
A: China’s recent economic problems and the ongoing uncertainty surrounding Greece has affected overall equity market performance this year. Having said that, the net trend is still up year on year, unless your asset allocation is out of kilter. I would therefore only be concerned if you were managing your portfolio yourself. If you are, it may be worth taking a close look at your asset allocation and seeing whether it matches your appetite for risk. The smart-money is however being outsourced to fund managers who run risk rated low cost tracker portfolios or actively managed funds of funds. If your portfolio is in the hands of a trusted fund manager and your investment is risk-rated, you should think long-term and let them take advantage of the ups and downs in the markets. That’s what you are paying them for.
Q: With interest rates on Cash ISAs being so poor, I’m looking to set up a regular monthly payment into a Stocks & Shares ISA. Can I find one on one of the price comparison websites?
A: You won’t find lists of stocks and shares ISAs on price comparison websites. Shopping around yourself may indeed lead to confusion and you could end up doing nothing as a result. With something as complex as stocks and shares ISAs, I would recommend seeking investment advice as a starting point. If you want something quick and easy, you could take the plunge and do it with your bank. If however you are a discerning investor who wants to maximise capital growth potential, speak to your independent financial adviser (IFA) who will have all the tools to do the shopping around on your behalf. Your IFA will discuss charges, your investment strategy, approach to investment risk, term of investment and contribution amounts. Also critical is to review the plan regularly so make sure you discuss this with your adviser.
Q: My fixed rate mortgage deal has come to an end and I am now on the standard variable rate. Should I stay on the standard variable rate or should I switch to another fixed rate?
A: Interest rates are at historically low levels and the general consensus is that interest rates are likely to start going up again in 2016 – especially if inflationary pressures continue. The best fixed rate deals around at the moment are highly “equity dependent” meaning only those with equity of 30% or more in their property are likely to qualify for the best mortgage deals. If you have a lot of equity in your property, going onto a fixed rate now could be a masterstroke. The Bank of England has threatened interest rate rises before and done nothing. This time I think they are serious.
Q: My new employer operates a group pension scheme and I am eligible to join it straight away. They will match my contribution of 5% of my salary. I don’t intend to stay there very long – should I join the scheme or not bother?
A: Join the pension scheme. Many people envisage that they will not stay with an employer very long only to end up being there for 10 years! If that happened in your case, you would be very pleased to have made the decision to join. If indeed you do leave your employer within say two years of service, you will have the option of transferring the value of your pension fund to a new pension plan of your choosing, such as your own personal pension plan or to a new employer’s pension scheme. You also have the choice of a refund of your contributions if you only stay for a very short period. The drawback here is that the refund may be taxable and only your own personal contributions will be returned. Either way, the choice is clear. Join the pension scheme. You have nothing to lose.
Q: I have recently been blessed with a baby boy. Are there any insurances I should be considering as a single Mum?
A: Yes. As a start, I would suggest some life insurance written under trust to your son. Then write a Will. This will ensure that in the unfortunate event of something happening to you, you would have left your son with the financial head start in life we all wish we had together with details of your wishes; such as who would be his legal guardian. This is extremely important and should be arranged as a matter of priority. If affordable, I would also recommend that you set up a long term savings plan for your son before he starts walking. Speak to your financial adviser who should be in a position to advise you on the best way forward with regard to what is affordable, how much cover you need, the best savings plans out there and getting your Will sorted out once and for all.
Akwasi Duodu, Dip PFS
