The Times - UK (2022-05-28)

the times | Saturday May 28 2022 61

Money

Which energy

saving tips are

really worth it

Page 64

to retire soon, consider if you actually need to take money out now. If not, leave it invested so you can benefit from any potential recovery. Some workplace pension funds auto- matically “de-risk” as you approach retirement, often by moving some of your equity exposure into bonds, which are considered less likely to lose money, but also less likely to grow. This can happen as early as your mid-forties. Check whether your scheme does this and if it fits in with your goals. Jason Hollands from the investment platform Bestinvest said: “Setbacks go with the territory of equity investing. They can be uncomfortable at the time, but if you are investing for, say, 20 years, there is plenty of recovery time.” If you’re in your thirties or forties, you should still be invested in 2050, so you can ride this period out. “By sitting tight for the long term, you benefit from compounding, which is the income you receive from dividends reinvested,” said Dzmitry Lipski from the investment platform Interactive Investor.

0 Reassess your risks “When times are good, many people will happily consider themselves ad- venturous. It’s only after sharp declines that they might conclude they were more cautious after all,” Hollands said. If you bought risky investments while the market was doing well only for them to plunge this year, it’s time to

T

he stock market is at a critical
point — on one side there are in-
flation risks, on the other the
threat of a recession.
Tech stocks have endured some pro-
longed falls and there are concerns
about the health of retailers after
worrying results from stores in the US.
It’s time to make sure your savings
are in a fit position to cope with what-
ever comes next.

0 Ensure you have enough cash
Inflation is at 9 per cent and will rise
further. While it is expected to fall and
settle down at about 4 per cent for the
next few years, at that rate your pur-
chasing power will halve in 16 years.
Despite inflation eating away at it, you
need to hold some cash — having three
to six months of expenses accessible in
case of unexpected bills or if you lose
your job is sensible.
Virgin Money’s M Plus current ac-
count pays 2.02 per cent interest on bal-
ances up to £1,000. For savings over
£1,000 look for the best easy-access ac-
count so you can withdraw cash in-
stantly. The Chase Saver Account offers
1.5 per cent, although you must hold a
Chase current account to open it.

0 Make some time
The longer you invest in the stock
market, the better your results are likely
to be. If you were planning to cash in
your investments, perhaps if you intend

assess if they still meet your needs. If you need help, the pensions provid- er Standard Life has a risk question- naire on its website, while Bestinvest offers a free coaching service with an online risk assessment. Don’t confuse risk with volatility, either. “Volatility, while painful, is not risk,” said Maike Currie from the wealth manager Fi- delity International. “If you’re investing for the long term, fluctuations along the way do not matter.” Shares are volatile over short peri- ods but become less risky if you hold them for long enough. For example £10,000 invested in the iShares Core S&P 500 exchange traded fund in November 2008 would give you £54,000 today. In March 2009, though, it would have been worth about £7,000. “If your holding period is five years or more, then the chance of losing money is next to none,” said Christo- pher Rossbach from J Stern & Co, a fund manager.

0 Ensure you’re diversified Not all equity types have fallen this year, so holding a variety of assets

would have shielded you from some of the stock market’s volatility. For example America’s S&P 500 index is down about 14 per cent, but Britain’s FTSE 100 is up about 0.95 per cent. Growth stocks, those in firms that are expected to grow rapidly, are down 20.8 per cent, but value stocks, which are deemed to be cheap relative to the value of their business, are up 2.6 per cent. “Investors who find their portfolios are down 20 per cent or more have almost certainly not suitably diversified either by asset class, market exposure or investment style,” Hollands said. Even for higher-risk investors, Hollands suggested holding some gold and cash as well as equities to mitigate risk. Real assets, such as com- mercial property and infrastructure, can help to protect against inflation too, said Graham Bishop from Handels- banken Wealth & Asset Management. Within your equities, have some growth but also some value. Currie suggested adding funds that invest in companies that pay dividends. Dividends contribute the most to total returns over a long period of time because they are more reliable than share price gains.

0 Become more active One way of reducing your risk is by investing in a passive fund that aims to match the return of a popular stock market index, such as the S&P 500 or FTSE 100. One problem with these funds is that they must own every fund in the index — even the bad ones. In theory, a stockpicker can avoid these and invest only in the best companies. “When markets are volatile, the active manager has a huge competitive advantage,” Currie said. Many popular funds have struggled in 2022 compared with passive funds. That’s where diversification comes in. If you like Terry Smith’s Fundsmith Equi- ty, for example, blend it with a value fund such as Artemis SmartGarp Glob- al Equity, Lipski said. Look at some of the areas that have lost the most so far and consider buying at an attractive price. Bishop suggested that small and medium sized companies may have fallen too heavily. Investment trusts can be good for consistency — there are 13 that have in- creased the dividends paid to share- holders annually for at least 40 years. City of London, Bankers, Alliance and Caledonia investment trusts have all had 55 years of dividend increases. “This long-term consistency coupled with good capital growth is why the investment trust industry is over 150 years old,” said James de Sausmarez from Janus Henderson Investors.

How to beat the market chaos

Investments have taken a battering this year, but here are five steps that will help to protect your assets, says David Brenchley

14%

fall in the S&P 500 index of large US companies in 2022 so far

U

shaanaa Shah was nervous as she handed over her provisional driving licence and booking reference (Imogen Tew writes). She had been revising for weeks and was desperate to pass. She was ready to take her practical driving test, which had been delayed by the pandemic, but needed to do her theory test first. However, the woman at the test centre said she had no booking in her name and asked how she had booked it. Shah, 27, replied that she had googled “driving theory test” three weeks ago, and clicked on the first link. The company had charged her £45, but her details were incorrect on her confirmation email so she booked again, paying another £45.

Booking a driving theory test through the government website costs £23. The test centre told her that she had potentially been scammed and was the third person that day to have turned up having been duped online. “My heart dropped,” Shah said. “I was in shock. I had no thoughts about it not being legitimate when I booked it. I felt so stupid — why didn’t I just book it on the government website?” Third-party booking services for theory and practical driving tests have popped up online in recent years, sometimes charging more than double the amount it would cost to book through the government website. From speaking to the Driver and Vehicle Licensing Agency (DVLA), a government

department, Shah found out that the company she used had taken her money and booked her a test in the right location but wrong date (two months later). While some sites will book you a test at your chosen time and location, although for a higher fee, others will book a random test and amend the booking confirmation. They do this to entice you with an earlier date and time than you might be able to get through the official website. The DVLA initially said that there was nothing it could do. The department told Shah that this had happened to “thousands of people”, who usually then need to rebook. In Shah’s case, since she had a booking in the future, the DVLA was able to reschedule it for a date that was convenient. “This lovely man from the DVLA told me that he had just spoken to a guy from the Isle of Man who had been booked at a test centre on a Scottish island,” Shah said. “I’ve finally taken my test — and passed.”

‘I paid £90 for a

driving test that

wasn’t booked’

The Times - UK (2022-05-28)

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