the times | Saturday April 30 2022 61Money
Customers can take out cash over the
counter at the St Mary’s post office, but
it closes at 3pm on weekdays and
12.15pm on Saturdays. It is shut all day
Sunday.
If you need to make a cash withdraw-
al outside of post office opening times,
the nearest freeATM is in the wall of a
Tesco Express in Penzance. A returnCyclically adjusted price/earnings ratiosThe 2000 spike v now
Source: Barclays, Datastream010203040502000 05 10 15 2020MSCI USAMSCI UKStock market valuationsOnline
Follow David Brenchley’s
investments as he
makes his changes
thetimes.co.uk/getrichslowlyterritory, which is defined as a 20 per
cent fall from a recent high, and the
more balanced S&P 500 is 10.6 per cent
lower than in January. Selling now
would merely lock in losses, or at best
lower your losses. Continue drip-feed-
ing your cash into your favourite invest-
ments on a monthly basis. This way, by
buying high and low, you average out
the price that you pay for those invest-
ments. “You’re also trying to account
for the fact that we simply don’t know
when the tide will change,” said Dan
Lane from the investment app Freet-
rade. “If you wait until everything is
back to normal and the market is
riding high, that precious time
that could have been spent
in the market and those
likely lower prices will
have gone to waste.”
One thing that lower
share prices do provide
is the chance to build
the portfolio you have
always wanted, said
Coombs. “If Apple’s the
stock you’ve always wanted
to own but it’s been too expen-
sive, perhaps this is the time.”
After recent sharp falls, technology
stocks look cheaper than they have
been for a long time. Allianz Techno-
logy Trust, for instance, is down
32.5 per cent since November. At
249.5p, the trust’s shares are 15 per cent
below the 294p value of its portfolio of
companies. The average price to earn-
ings ratio of the companies that the
trust holds is 26 times — much cheaper
than the 46 times it was at the end of- Both of these factors make the
trust an attractive investment, said Will
Interactive Investor said that since
the start of 2020, customers with only
a general investment account had
made an average return of 7.3 per cent
compared with an 11.7 per cent return
for customers who only held an Isa.
Paradise’s investments are down
about 20 per cent since he set up his
Isa. He is mainly invested in
supposedly fast-growing shares such
as the electric carmakers Tesla and
Nio; the hydrogen firms ITM Power
and Plug Power; and plant-based food
producers such as Beyond Meat and
Tattooed Chef. These companies are
under pressure because their
revenues and hoped-for profits are
expected years into the future and
current levels of inflation threaten to
erode their value.
Things will hopefully turn around
for the rookie investor, who works as
an insurance underwriter for
Newbury Building Society, and he’ll
start making share price gains.
Last year he learnt the error of his
ways and opened an Isa with tracker
funds following the FTSE 100 and
S&P 500 as well as commodity ethical
funds. It’s hard to change habits —
once you’re in an investment account
you can’t transfer them to your Isa.
Instead you have to cash them in and
start again. Start with an Isa and then,
if you’re lucky enough to have any
money left over, move from there.
That is the golden rule.By all means dabble in
shares — but use an Isa
W
hen Josh Paradise
decided to start
investing, in
December 2020, his
first action was to
open a general investment account
with Freetrade, an investing app. It
wasn’t until last year that he learnt
about, and opened, a stocks and
shares Isa. Paradise is 26.
Plenty of people my age do the
same. They go to Freetrade, open an
account, invest their money and don’t
think too hard, or at all, about what
type of account they have and
whether it saves them tax. About one
in six customers of Hargreaves
Lansdown, the UK’s biggest
investment platform, have one of
Hargreaves’s “fund and shares”
accounts (the firm’s version of a
general investment account) — but
not a stocks and shares Isa.
Paradise’s investment account is
worth £1,500, so he has got a fair way
to go until he will have to pay any
capital gains tax on any returns. You
pay between 10 per cent and 20 per
cent on any investment gains above
your annual £12,300 capital gains
tax (CGT) allowance. Dividends
gained above the £2,000 allowance
are taxed at between 8.75 per cent
and 39.35 per cent. You pay no tax on
any investment gains or dividend
payments you get through an Isa.
So Paradise may think he has a
long time to wait before he has to
worry about tax, but a small amount
invested today can soon rack up into
something substantial tomorrow,
which is the beauty of investing.
Paradise’s £1,500 could turn into a
six-figure sum in 20 years’ time, and
his future self will be very happy if he
thinks about tax breaks now.
If you had invested £500 every
month for the past six years into the
L&G International Index Trust fund,
you would be sitting on a profit of
nearly £16,000, according to the datafirm FE fundinfo. If the investment
was held outside of an Isa, any further
gains over your investment life would
be reduced because of CGT.
As it’s the beginning of the tax year,
my top tip for anyone starting out is
to not just spend time pondering
about whether there is more room for
the Tesla share price to grow, but to
take the time instead to understand
the tax benefits of a good old-
fashioned stocks and shares Isa.
That includes exploring other Isas,
including the Lifetime Isa (Lisa),
which is aimed at helping young
people to save for either a house
purchase or their retirement. You can
invest up to £4,000 a year in a Lisa
and get a 25 per cent bonus (free
money) from the government on top.
You can have as many Isas as you like
and put money into one of each kind
— cash, stocks and shares or Lifetime
— up to a total of £20,000 a year.
My investment journey has been
far from perfect — for starters, I
should have begun it much earlier
than I did (I started working for an
investment platform aged 24, became
a financial journalist aged 28, but only
started investing at the age of 33), but
the one thing my career has taught
me is that Isas should be the first port
of call for newbie investors.
If I hadn’t been working in this
industry but still started investing,
I might have gone down the same
route as Paradise. But that does not
mean you cannot change tack.
Of those investors that joined
Hargreaves in 2020 and 2021 by
initially opening a fund and shares
account, one in ten went on to open
an Isa within 90 days.David
Brenchley
Get rich slowlyowly
Crighton from the research firm Stifel.
Laith Khalaf from AJ Bell, the plat-
form, said that in what looks like a
tough environment for investors it was
as important as it has ever been to di-
versify your portfolio. This includes
holding equities, but also some bonds,
gold and even cash. This should give
you “a portfolio that isn’t facing all in
the same direction”. Diversification al-
so includes holding different styles of
stocks or investment funds within your
equity bucket.
“The extremely hot performance of
US tech might mean investors are
heavily exposed, and it might be a
good time for some rebalan-
cing,” Khalaf said. “You
might find some old eco-
nomy stocks that offer
dividends that are well
covered by earnings,
providing a buffer
against recession.”
Khalaf said that the
banking giant Lloyds,
the insurer Legal & Gen-
eral and the cigarette maker
British American Tobacco of-
fered dividend yields of between 5 per
cent and 8 per cent. Those prospective
payments are also well covered by the
earnings generated by the businesses.
Jason Hollands from Bestinvest, the
wealth manager, agreed that it might be
time for investors to opt for funds with
greater emphasis on the valuations paid
for companies and a focus on resilient
dividend generators.
For those who prefer to invest in
funds over individual shares, Hollands
suggested TB Evenlode Global In-
come, Threadneedle UK Equity In-
come, BlackRock UK Income and
Temple Bar Investment Trust.
For those keen to look away from
equities, some investment trusts are fo-
cused on preserving wealth, essentially
protecting your cash when stock
markets are falling. These will invest
across assets that move differently to
each other and to broader asset classes.
Lane suggested Ruffer Investment
Company and RIT Capital Partners.
“Both are diversified and make use of
assets like private equity funds and
options normal investors wouldn’t have
access to. They also rotate the portfolio
on your behalf so you don’t need to keep
on top of those spinning plates.”Dash for cash on the Isles of Scilly
T
he post office on the Isles of Scilly
has applied to install a cash
machine after the closure of the
archipelago’s last remaining bank
branch on Monday.
A planning application for the ATM
has been submitted to the council and
will be decided on June 3. If it is accept-
ed, the Post Office said the machine
would be installed within weeks.
Lloyds shut its branch on St Mary’s,
the largest of the five inhabited islands,
because it said only 33 of the 2,300
people living on the Isles of Scilly used
it regularly, and 71 per cent of its cus-
tomers also used other branches, on-
line and phone banking. Lloyds has
pledged to keep the branch’s cash ma-
chine in operation until the islands get
a replacement.
The nearest bank branch is now 44
miles away in Penzance — which re-
quires a boat trip of almost three hours.boat trip from the isles to Penzance
costs £139.20 — and the ferry does not
run between December and February,
meaning a flight is the only option.
Flights start at £127 for a day return.
Steve Sims, the Isles of Scilly council-
lor for tourism and the economy, said
that replacing the bank ATM was a dif-
ficult prospect, “because you need to
find somewhere to fit it”.
The planning application was made
by Lindsay Rodger, the postmistress
who has run the St Mary’s post office for
11 years. She said: “Local businesses
need tourists to be able to withdraw
cash, 24 hours a day and for free.
“I hope that we’re successful with the
planning application for a brand-new
ATM becuase that will reassure the —
islanders that at least there remains
somewhere cash can be withdrawn for
free.”
George NixonThe last remaning bank branch on
the Scilly Isles was closed on April 25of a crash?
23%
Fall in the tech-
heavy US Nasdaq
index since last
November9/11 spooks
the marketsEquitable
Life scandalBeyond Meat is tipped as fast-growing, but its shares are down 38 per cent in 2022REUTERS; GETTY IMAGES