Now is a very important time in history, where individuals need to take notice of what is happening around them in the financial world, should they wish to acquire additional wealth and have the option to retire faster. Government lending is at an all-time high, the Banks have been given a crutch by the Government, the Bank of England (BOE) has reduced interest rates to an all-time low, Quantitative Easing and austerity cuts look as though they may be here for many years to come, pension schemes remain underfunded and we are now all living longer. On top of all this we now have Brexit and I have to ask the question ‘what have you and your financial adviser done to hedge your pension and investment portfolio against the UK’s exit from Europe’?
It’s frightening to think about what the future holds, with economies, cultures and technology changing at the rate it has over the last decade, it seems almost impossible to imagine what the world will look like as we arrive at the later stages of our life. But we can give ourselves a helping hand if we act quickly enough and reclaim our personal power from the financial services institutions.
Creating sufficient wealth over our working lifetime will enable us to have choices in later life. Being dependent on others in the future, I do not believe, will be a happy place. The question is “how do we create additional wealth without putting additional pressure on our current expenditure?” With low interest rates and mediocre investment returns, creating additional wealth is becoming more difficult. However, suppose I could show you how to create additional wealth from the money you have already accumulated to date. No additional expenditure required, but a very favourable outcome.
Many investors concentrate their portfolio in their home stock market and in some cases they only hold a small group of stocks. This is often a common occurrence when people have bought shares because of Utility or Bank offers or inherited a share portfolio from their parents or a relative and feel obliged not to cash them in and take the proceeds. Many company directors working for larger organisations also have large shareholdings, often in share incentive schemes and due to a sense of loyalty, find it difficult to sell the stock when it’s a good financial decision to do so. There is often an emotion attachment which is difficult to shift.
Limiting one’s investment universe to a handful of stocks, or even one stock market, is a concentrated strategy with possible risk and return implications. Consider the analogy of the roulette wheel. If you want to gamble for the highest odds you place your chips on a single number and if you are successful you win big. Likewise you could spread your chips around single numbers on the table (not to dissimilar to the retail unit trust fund managers or buying individual stocks and shares) and hope that the odds on the numbers that win are more substantial than the losses that did not.
Alternatively you could gamble by spreading the risk in your supposed favour by betting on red or black and get offered even returns by the house (or by using in-house managed funds). But it’s not the 50:50 odds you would expect. The wheel is always in favour of the house therefore by betting on red or black you will have an 18/38 chance of winning 47.37%, with the house winning 52.63%. This is again similar to active fund managers, even if they do outperform the benchmark, the additional charges incurred will most likely, over the longer term, reduce the return to below the benchmark. The question is, does investing with active management make a substantial difference to your return or is it just gambling with your money? It is worth remembering that while a betting system may sound like a good idea, over time, they have been proven beyond any shadow of a doubt to be losing plays.
The media is full of experts predicting which markets are going to perform best over the forthcoming months and years, so investors by listening to this noise, quite often form a biased opinion of what’s going to happen next. If they decide to follow up this prediction with action and buy or sell stock to put themselves in a financial position to take advantage of this prediction, they are gambling not investing. The financial professional may make a prediction because they want to appear on some form of media commentary, or to advertise their company or make some noise with their prediction because they would like some personal acknowledgement. However, if it all goes wrong, which it does, the consequences have to be faced. I believe making predictions is foolhardy, because any amendment to political, global currency fluctuation or investor sentiment will see all bets fall out of the window and who can control such changes.
If I am ever asked ‘which financial sectors should I buy next, to get the best return on my investments?’, I often in the nicest possible way, have to refer to my lack of crystal ball reading skills and point out that no one knows with any degree of certainty. Even if a commentator calls the markets correctly, you still have to ask was it skill or just random luck. Even the most powerful professionals in the world of finance make these predictions and call it wrong big time, with huge global consequences.
So, why try and predict outcomes not under your control. Ask yourself “why would you pay somebody, who said that they can predict what is going to happen next?” and perhaps worse, why would you believe them if they said they could. According to Google, there are 1.2 million fortune tellers (or people suggesting that they can predict your future) appearing on their site, and without checking them all, I would expect a financial fee to be passed across their palms before they tell you about your long healthy lifespan and future search for love. Perhaps some may say we should add fund managers to this list.
A good question to ask yourself is: “would you pay a fortune teller to predict your financial future?” If not why are you paying your fund manager?
The financial services world is not always as it seems. Wealth that belongs to you, is systematically being taken from your pension and investment accounts unnecessarily, transferring your wealth from you, to the financial services industry in the name of active management (I call this guessing or gambling). I believe now is the time to stand up to the industry and take back power and have control of your money.
My book ‘Retire Faster’ available on Amazon will guide you through the investment jungle, where currently, the investor is the prey. I will show you how to become the hunter and demonstrate to you, that there is another way to create wealth. A way that allows investors the opportunity to achieve greater financial efficiency, greater independence and a more profitable return, whilst enjoying a much more transparent and consistent investment experience.
The question is, do you want to continue to gamble with your retirement fund, or invest it efficiently?