Seasons Greetings and good will to all men - and
women!
The 12 months to 1st December has seen the FTSE 100 has fall around 35%. What has caused this? Well there are two causes:
1. A systemic failure in the global financial system, which in turn lead to a complete collapse in investor confidence
2. Further, markets for investments are now entering a period of extreme volatility as recession takes hold. Such volatility is caused by investors trying to second guess where the ‘bottom’ of the market actually is.
However, there may be a silver lining to all this doom and gloom. Many commentators believe most asset classes are undervalued due to negative sentiment. Indeed all post war recessions have signalled a recovery in stock markets. Further, Fixed Interest and Corporate Bond investments are likely to find favour in the coming 12 months as interest rates sink to their lowest for half a century.
Now is a time for two strategies you should adopt:
1. Stay calm! Selling out would crystallise paper losses.
2. It may be a good time to consider further investment especially since the markets are at a low point. Has the at ISA allowance gone unused? Have you made pension contribution especially as you may be a 40 or 45% tax payer? Why not contact us for advice?
I would like to leave you with one thought. Many so called investors are little more than speculators; gamblers if you like. They try and guess were the next ‘hot spot’ is for a quick buck. However, the following provides a salutary lesson why diving in and out of investments can prove very costly:
Had you invested from 31st December 1985 to 31st January 2008 FTSE All Share Index you would have enjoyed an annual average return of 10.9%. If you had missed the 10 best days this would have fallen to 8.6%. Had you missed the best 60 days you would have seen your return fall to just 1.7%; this because you missed 60 out of 8,061 days!
Source: Reuters Ecowin on a total return basis in sterling terms.
The value of investments and income from them may go down. You may not get back the original amount invested.
The 12 months to 1st December has seen the FTSE 100 has fall around 35%. What has caused this? Well there are two causes:
1. A systemic failure in the global financial system, which in turn lead to a complete collapse in investor confidence
2. Further, markets for investments are now entering a period of extreme volatility as recession takes hold. Such volatility is caused by investors trying to second guess where the ‘bottom’ of the market actually is.
However, there may be a silver lining to all this doom and gloom. Many commentators believe most asset classes are undervalued due to negative sentiment. Indeed all post war recessions have signalled a recovery in stock markets. Further, Fixed Interest and Corporate Bond investments are likely to find favour in the coming 12 months as interest rates sink to their lowest for half a century.
Now is a time for two strategies you should adopt:
1. Stay calm! Selling out would crystallise paper losses.
2. It may be a good time to consider further investment especially since the markets are at a low point. Has the at ISA allowance gone unused? Have you made pension contribution especially as you may be a 40 or 45% tax payer? Why not contact us for advice?
I would like to leave you with one thought. Many so called investors are little more than speculators; gamblers if you like. They try and guess were the next ‘hot spot’ is for a quick buck. However, the following provides a salutary lesson why diving in and out of investments can prove very costly:
Had you invested from 31st December 1985 to 31st January 2008 FTSE All Share Index you would have enjoyed an annual average return of 10.9%. If you had missed the 10 best days this would have fallen to 8.6%. Had you missed the best 60 days you would have seen your return fall to just 1.7%; this because you missed 60 out of 8,061 days!
Source: Reuters Ecowin on a total return basis in sterling terms.
The value of investments and income from them may go down. You may not get back the original amount invested.
Inside this issue:
Extra Personal Allowances: Larkings point out some helpful strategies
What to do NOW: Robert Ayley offers some sage advice for current investments
Wealth Creation Specialist - December 2008 Newsletter
Extra Personal Allowances
HMRC have now issued further guidance on the increase in the personal tax allowance which is due to take effect from 7 September 2008.
The guidance is aimed at both employers and employees. Although the increase takes effect for pay dates from 7 September onwards the change will effectively be backdated for the majority of individuals until the beginning of the tax year.
As has been widely reported the increase in personal allowances from £5,435 to £6,035 will mean that the majority of basic rate taxpayers will be £120 better off for the current tax year. The increase is designed to compensate those tax payers who were worse off following the removal of the 10% starting rate of tax from non-savings income. Higher rate taxpayers will not be better off following the increase in personal allowances due to a corresponding reduction in the point at which taxpayers start paying the higher rate of tax of 40%.
Please get in touch if you require any clarification of the new rules.
Income shifting’
‘Income shifting’ refers to a situation where one spouse or civil partner generates most of the profits of a business but the other receives a proportion of the profit and the couple save tax as a result. more reasonable result.Example: Individual 1 and Individual 2 form a company, each owning 50 £1 ordinary shares. The business of the company is to provide the personal services of Individual 1. Individual 2 spends around five hours a week on back office duties for the business. In the first year they each receive a salary of £5,000 and dividends of £30,000. The salary received by Individual 2 is considered to be the market rate given the nature of the work done and time spent doing it. The company has no significant assets or liabilities.
If Individual 2 has no capital in the business and bears no risk the whole of the £30,000 would be treated as shifted income because Individual 2 is already receiving a market rate for the work done, has no capital in the business and bears no risk.
The government has reconsidered its position following a period of consultation .The government now intends to introduce legislation through Finance Bill 2009 and will not enact legislation effective from 6 April 2008.
We await with interest the conclusion of the further consultation on these proposals.
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Ltd. Neither Professional Solutions Group Ltd nor
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