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No 6, March 2013
Exclusive Financial Updates, News & Investment Ideas From Tower Hill Associates
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Tempted to forego your exposure to government bonds?

 

There are repercussions if you follow the media frenzy to sell out of UK government bonds – increased portfolio risk! I strongly believe that government bonds should continue to play an important risk diversifying role in well balanced portfolios. This viewpoint is supported by Steve Williams, from Cormorant Capital Strategies, who explains in his article why government bonds should be included in investment portfolios.

 

“Paws” for thought

Recently, when rescuing one of my cats from a tree yet again, I wondered if Billie would fare better than Orlando, the ginger moggie who recently outperformed a group of financial experts, in an investment challenge? This slightly frivolous experiment does underline why investing in a diversified portfolio of assets makes far better sense.

 

I believe that basing your investment strategy on someone else's forecast is a haphazard way to build wealth. No matter how diligent and expert your forecaster is, unexpected events have a way of messing up their expectations. As well, those who insist on believing that forecasting is a sustainable investment strategy tend to under-rate the capacity of capital markets to very quickly build all those expectations into prices. You think markets will tank/soar this year? So does someone else and they're trading off that belief.

 

The good news is that you don't need a crystal ball to build wealth but sound ongoing financial planning advice supported by a well-diversified portfolio of assets designed for your needs and risk appetite. The service needs to include timely rebalancing advice as well as portfolio tax mitigation and strategies to reduce dealing costs both of which increase net returns. However overall costs matter too and I wouldn't pay much more than an all inclusive 1.5% per annum (much less for larger portfolios) to include the annual platform and fund charges so I can't expect my clients too either!

 

Most of all you need to keep your cool and exercise patience. Just like my cats.

 

Should you wish to discuss any of the issues raised in this newsletter, please do get in touch on 020 8891 6375.

 

Best Wishes,

John Lang

Director

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Tempted to forego your exposure to government bonds?
Make sure you understand the risks to your portfolio.


Steve Williams from Cormorant Capital Strategies argues that you are in danger of reducing your portfolio’s diversification to dangerously meaningless levels.
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Ginger moggie beats the experts: why a diversified portfolio of assets makes sense

In a recent challenge, set by the Observer newspaper, the talents of a group of stock-picking professionals were outclassed by Orlando the cat.
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Inheritance tax planning

The recent government U-turn on the inheritance tax threshold is expected to affect four million UK families. Specialist inheritance tax planning can help reduce these large tax bills.
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Year end tax planning

The Budget is scheduled for Wednesday 20 March, so your 2012/13 year-end tax planning is best be wrapped up before then.
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State pension reform

In mid-January, the Department for Work and Pensions (DWP) published its long-awaited White Paper on changes to the state pension system. The reform only establishes a very modest foundation on which to base your retirement plans and is not a substitute for a private pension.
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