Monthly Archives: January 2011

Money and Things.

Money and things finance related.

An unexpected thing happened recently. Without warning or giving reason my credit card company lowered my credit limit by about 80%. I’ve not been near my limit in ages, so in that respect it was not a problem. Where it was a problem was that suddenly, and without warning, I’d lost an important source of instantly available emergency money. That ‘comfort blanket’ where you know that if something happened and you needed money *right now*, not in a few days, not tomorrow, but instantly (and if it is that sort of situation, then it probably is instantly), that supply had gone. Oh crap.

I suppose the proverbial silver lining to it was that got me looking at my whole money position, and especially to my pension situation. I’m sure most people are aware of all the fuss there has been in the press over the last few years over pension deficits and how a large proportion of the population are going to have very limited income when they retire. At the moment the basic state pension is just under £100 a week, or a bit below £5,500 a year. Not a lot to live off!

I do have a bit of money put to one side for my old age, but this did highlight that I do need to increase this, however I don’t have a great deal of free income coming in to add to this fund, so I must make it grow by itself.

So off to see a pension / financial advisor and see what he had to say. To cut a long story short, the final outcome was that we would put the money into a SIPP (Self Invested Personal Pension) and within that SIPP he would look after half and I would control the other half.
So I have put my half into a range of Investment Trust. Investment trusts are companies who invest their money in other companies! This is not as silly as it sounds. Let’s say you think that the countries of S. E. Asia or perhaps of Eastern Europe show growth potential. You could go off to their individual stock markets and buy into specific companies based in S. E. Asia or Eastern Europe (not always very easy to do), or you could find a U.K. based company listed on the London stock exchange which does just that, invest in these places, and then buy the shares of that U.K. based company (quite easy). So that’s what I’ve done; a selection of investment trust funds that look to S. E. Asia, to Europe, and to mining companies.

My advisor has gone in to European based Unit Trusts. Unit trusts perform a similar function to investment trusts, are often run by the same people, are far more popular, but are set up in quite a different manner. (Do an internet search yourself on something like ‘difference between investment and unit trusts’ if you want to know more about them.)

I’m quite happy with the idea that at times the stock market will go up, but it will also have it’s down periods. We had a down period with the recent banking crisis though the stock market has done a considerable recovery since then. There have been other fall periods in the past, there will be other fall periods in the future (tough, that’s the way things go). However what I’m looking for is say, if I average out the ups and downs over a period of 10 years, to grow by an equivalent of at least 10% a year. That is my minimum personal target. In good years this will not be too difficult to do, however the bad years will pull this figure down. So in reality I must look to at least 20% ‘good year’ growth to balance the bad years out.

What I’m also expecting is that my advisor should out-perform me. Professional advice does not come cheap, they have the financial training, knowledge of the market and access to far more financial information than me. So if I do out-perform him I may feel clever at having out done the professional, but also disappointed in that I will not have got value for money for the fees that I have paid.

Only time will tell.