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    Tag: investments

    Celebrating Financial Planning Week

    Posted on by Helen Buchan

    As part of Financial Planning Week 2024, we take a closer look at the PM+M financial planning team and the types of things they can provide advice on.

    Our financial planning team are here to help you make the most of your money. Headed up by partners, Antony Keen and James McIntyre, the team also consists of a director, three further financial advisers and a wider support team.

    The team works collaboratively with our specialists across the firm within our tax, corporate finance, accountancy and payroll functions to help you and your family plan for the future in a way that best suits you. No matter what your requirements are, our expert team will work closely with you to provide a tailored solution that not only enhances your financial position but provides peace of mind that your hard-earned money is achieving more in every way possible.

    Areas of expertise which the team would typically provide advice on include pensions, investments, tax and estate planning, lifetime cashflow planning, financial protection (life cover and illness cover) and services to court of protection clients.

    Some of the common questions our clients typically ask regarding their finances include:

    • I would like to retire at a certain age, how do I ensure I’m in a financial situation to achieve this?
    • Am I on track financially for my retirement?
    • Will my family and/or businesses be ok if I die or become ill?
    • Are my investments and pension investments appropriate in this economic climate?
    • How can I plan to minimise the Inheritance Tax I pay?
    • How much do I need to sell my business for and retire comfortably?

    Once we have spent time getting to know our clients and understanding their needs and objectives, we can then test different scenarios using our cashflow forecast software to understand the best plan of action for the individual circumstances and objectives.

    The relationships we build with our clients are paramount and we are always here to provide ongoing support and advice as plans can often change during the journey of life.

    Looking after over 300 million pounds worth of assets for our clients, you can be sure our financial planning team is perfectly placed to offer the best advice on looking after and getting the most from your assets. For further information or advice, contact a member of the financial planning team today by emailing enquiries@pmm.co.uk or calling 01254 679131.

    Is it a good time to invest during a recession?

    Posted on by Helen Buchan

    With predictions that we could be facing the longest recession since records began, we take a look at whether it can be a good idea to invest during a recession.

    If the moves by the central banks to raise interest rates fail to reduce inflation, it is looking highly likely that higher interest rates could further weaken economic growth.

    However…

    Successful businessperson, Warren Buffett, once said that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.” It may be sensible to take a contrarian view on stock markets: when others are greedy, they may continue to pay a large price tag to buy a share or asset. When confidence is high, people continue to invest and don’t think about downsides. When others are fearful, it may present a good value investment opportunity. You buy more for your money when prices are low! This doesn’t mean to say that values may not continue to fall for a period of time, but it does mean that over the longer term you may derive good value from buying low.

    The impact on investments

    Generally, recessions mean lower stock market prices, therefore higher levels of volatility than normal. The price of a stock should represent the current value of a company’s future cash flows and cash flows are created by the earning of a company. If there is lower spending in an economy, then this means lower earnings for businesses. This may also result in lower dividend distribution from the company to shareholders.

    If perceived earnings are lower, then a company’s share price is also going to drop. With the increased chances of a business struggling or worst case, going bust due to the challenges faced in a recession, the markets also consider this as a risk in share prices.

    Not all stocks are the same

    Different stocks will go up or down more than others in certain economic conditions. Stocks which are more sensitive to the overall health of the economy are often referred to as cyclical stocks and are those which will suffer from a reduction in consumer spending or unemployment rates rising e.g. retailers and airlines, with people spending and travelling less.

    On the flip side, are those who provide something which consumers consider essential, such as utilities and food. These are often referred to as defensive companies or defensive shares and would generally fare better and fall less. Albeit, utilities have seen more volatility than usual due to an unusual set of circumstances.

    Diversification

    It is key that investors ensure they have a portfolio capable of withstanding an economic recession rather than trying to time the market. This means including assets which are likely to do well during economic growth, but also some that are likely to do better during a recession – this is known as diversification! Although it is essential to carefully consider the risk profile, it is usually good to include a broad mix of equities, bonds, and some alternatives. It may also be a good idea to consider a variety of sectors and themes too.

    One rule that is often viewed as a simple way of achieving diversification, is the 60/40 rule. This means having 60% invested in shares and 40% in other diversifying assets and is seen as a sensible theory for trying to smooth out any peaks and troughs of investing in the stock market.

    Bonds

    One of the most common assets that usually perform better during a recession, is government bonds. There are a number of reasons why bonds typically do better and are generally seen as safer than stocks. Governments of advanced economies tend not to default and the income produced by a bond is fixed, this means that during a recession, investors often rush into bonds which in turn can bid up their prices.

    However, it has not been a good year for bonds so far with rising inflation and higher interest rates causing bond prices to plunge. This has resulted in bonds and shares falling together and having a negative impact on those portfolios working to the 60/40 strategy.

    The outlook of bonds therefore rests largely on inflation and how inflation is likely to be impacted by a recession.

    How can we help?

    As always, every individual situation is different, and it is vital to get advice based on your exact circumstances when considering any type of investment. PM+M’s Managed Portfolio Service, is a bespoke investment portfolio produced by us, and managed in collaboration with AJ Bell, to make your life easier.

    Working together, we continually monitor the market and conduct ongoing due diligence in relation to the funds held within the Managed Portfolio Service portfolio. We proactively make fund and asset allocation changes when we feel as though this is necessary in order to manage volatility and drive long term growth. Our Managed Portfolio Service aims to provide you with the best combination of investments to maximise your potential returns with a level of risk that suits you.

    If you would like to discuss your investments in more detail, or need some tailored advice specific to your situation, including more information on our Managed Portfolio Service, get in touch by emailing financialplanning@pmm.co.uk, or by calling 01254 679131.

    The value of investments can fall as well as rise. You may not get back what you invest.

    The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction.

    How to plan financially for a recession

    Posted on by Helen Buchan

    With forecasts predicting the UK is facing the prospect of a challenging two-year recession, inflation rising at a record rate and the cost of living crisis ever widening, as part of our recession resilience series, we consider some of the ways you can look to prepare financially.

    If possible, save an emergency fund

    During a recession, the risk of redundancy is unfortunately higher and this coupled with factors such as household bills continuing to rise, means it is extremely sensible to have an emergency fund available if at all possible. The ideal would be 6 – 12 months’ worth of expenses but obviously any amount is better than nothing.

    If you are able to raise an emergency fund, it can provide some much-needed peace of mind that you would be able to survive without having to take on additional debts or get in arrears with any bills. It is also important to remember that there can sometimes be unexpected events which arise and require immediate funds at short notice, such as damage to your property or vital car repairs.

    If saving an emergency fund is not an option, which is the case for many right now, then it is always worth looking closely at your everyday expenses to see if there are any savings that can be made there, although these may only be small individually, it can soon add up if there are a few.

    Review your investments

    Considering historical data, we know that stocks tend to rise right into a recession and fall during it. However, it’s impossible to forecast, as both markets and economies are unpredictable.

    It is important to understand that the market can be volatile, and you should aim to focus on the long term. Our Managed Portfolio Service is a bespoke investment portfolio produced by us, and managed in collaboration with AJ Bell, to make your life easier.

    Of course, when a recession is predicted, it is completely normal to worry about your investments. Working together, we continually monitor the market, conducting ongoing due diligence and proactively making fund and asset allocation changes when we feel it is necessary to manage volatility and drive long term growth.

    If you do have spare cash, there could be an opportunity to buy whilst markets are devalued; this could represent good long-term value.

    However, if your cash isn’t available to invest for at least 5 years, it’s worthwhile reviewing bank interest rates to ensure that you are capturing the most efficient return.

    Examine your mortgage

    Look ahead and speak to a mortgage expert before there are changes in your circumstances or any fixed rates come to an end. Unfortunately, it is looking likely for many that a rise in interest rates is inevitably going to lead to higher mortgage payments so it is sensible to start looking now at ways you are potentially going to be able to manage this. It may be necessary to look closely at your monthly expenses so see if there are any possible savings to be made which could cover a rate rise.

    Are you protected?

    Most people’s greatest asset is their income so in uncertain times, it’s more important than ever to make sure you are protected if you were to become unable to work because of illness or injury. Income protection or critical illness cover could provide a vital financial lifeline to you and your family should the worst happen and you become too ill to work.

    Another one to consider could be mortgage life insurance which would provide a lump sum to your family if you were to die prematurely. This could remove the huge burden of having to cover the remainder of the mortgage debt for your family in this difficult situation.

    Think carefully about your pension

    When faced with difficult financial challenges, it could be that your pension is low down on your priority list but this could prove to be a costly mistake in the long run. Your pension provides a great, tax efficient way to save and it is important to protect it, even when cutting back on your contributions could make life easier in other areas.

    If you are getting close to retirement and are concerned that your pension fund may have decreased in value because of the falling stock market then speak to your pension provider, for most, this shouldn’t be a problem as the level of risk for a pension portfolio decreases as you get closer to retirement age.

    If you don’t already have a pension, it could be a good time to consider starting one as if you look to invest while the stock market is low, it can provide more opportunity for higher returns in the longer term.

    Summary

    There is no doubt that the coming months are going to be a huge challenge for many but considering some of the above factors in advance and being pro-active with planning for the worst, could make a huge difference to your financial outlook long term.

    Get in touch

    For further information or advice, contact a member of our financial planning team today to talk through your personal circumstances, email enquiries@pmm.co.uk or call 01254 679131.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.

    KEEP CALM AND CARRY ON

    Posted on by Rebecca Campbell

    As the Ukraine-Russia crisis escalates, waves are being created across the financial markets, however, we’re urging investors to keep calm and carry on.

    As Russia crossed the border this morning (24 February 2022), an invasion of its neighbour may, at least in the short term, extend 2022’s volatility in the stock and commodity markets. The FTSE 100, for example, was down -2.5% at market open this morning, and down around 5% from its peak on 10 February.

    We can’t say with certainty how this will fully play out, but as such, our financial advisers at PM+M are ready to react to developments and make moves as appropriate.

    However, from what we have observed so far, we expect the following:

    • Sanctions on Russia are likely to be highly inflationary, especially in the short term. This has already been observed through an increase in the oil price
    • Uncertainty will hit equity markets, especially those with close proximity (Europe) or those that carry higher risks
    • Russian equities have been hit extremely hard, down almost 40% this year at the time of writing, and this is likely to persist
    • Government bonds will rally in the short term, although this may be muted due to the inflation risks

    Over the last couple of years, we have acknowledged the threat of inflation, and have already positioned for this*, for example:

    • In portfolios with higher equity weights, we use the iShares Energy ETF which invests on the large oil companies; this is up 4% today and up 20% year to date (at the time of writing)
    • We hold US TIPS in the lower risk portfolios which brings some protection against inflation; this ETF is up 2% this morning
    • We hold lower risk equities such as Consumer Staples and Health Care; although they have fallen in value, the move is less than that of the wider market given their perception of being less impacted by world events
    • We have shortened the average maturity of our corporate bond holdings which lowers the overall portfolio risk

    Our direct exposure to Russian equities in all portfolios is less than 1% as it already represented a very small amount of global stock markets.

    In terms of what investors should do against the media hype on major geopolitical issues, it is neither ‘sell in a panic’, or a ‘buy everything’ reaction.  For most long-term investors, they need to ‘keep calm and carry on’.

    For the immediate future, it is hard to predict what the markets are going to do, and while the financial markets don’t like uncertainty, our timeframe as investors to create a long term financial plan is years and possibly decades, not days, weeks or even months.

    History has shown us that stock markets can be fairly predictable over long periods of time. They tend to go up over multi-year time periods, so, investors need to ask themselves ‘will stock markets be higher than this when I retire?’. Looking at financial market history, the answer is probably ‘yes’ (if they have a decade or more ahead of them).

    So the message from us is, broadly: keep calm and carry on.

     

    *This refers specifically to PM+M’s Managed Portfolio Service

    Remember that investments go up and down in value, and you could lose money as well as make it. How you’re taxed will depend on your circumstances and tax rules can change.