T.Last week’s financial turmoil caused by the mini-budget damaged millions of UK household pensions, Isas and investments. What effect has it had on your money? If so, what can you do about it?
A blow to Isas and stocks
Some individual stocks have fallen significantly over the past year, and many have fallen further after the budget. His Ocado, an online grocery retailer, is down 71% for the year. House builder Persimmon is down 55% and M&S is down 49%. However, BP increased by 28% and Shell increased by 36%.
If you put Isa’s money in a bond fund, you’re out of luck. They are marketed as a prudent and safe investment. But those invested in British gold coins (bonds issued by the British government) fell by about 12% just two days after Kwasi Kwarteng’s mini-budget and have not recovered since.
The FTSE 250 index, which is made up of medium-sized companies (retailers, home builders, etc.), performs much worse than the FTSE 100. It’s down 8% from budget and down nearly 30% from its peak in September. last year.
The UK’s most popular fund for small investors is Fundsmith Equity, with around £24 billion under management. The investor is down about 1% in the last two weeks, and he’s down 9% if he invested a year ago. However, in the last five years he has risen by a whopping 72%. Few people would want to be saved.
What it means for your pension
Pension funds are usually more stable than the stock (equity) market because they are a mixture of equities, bonds and real estate. But bonds have also taken a hit as they have performed so poorly. For example, Legal & General’s standard pension fund, invested on behalf of many UK employers, has lost about a tenth of its value in the last six months.
If it is a final annual salary type pension, there is little need to worry. However, it is now mostly confined to the public sector.
good news
Yes there are several. The proportion of pension funds invested in UK stocks and bonds is much lower than it was a generation ago. Microsoft, Apple, Nestlé and Samsung are more likely to be included in pensions than most companies in the UK.
Wall Street has also fallen, but the impact on us is minimal as the dollar has risen so far against the pound. As Bestinvest’s Jason Hollands points out, in Sterling terms, the S&P 500 index of US giants is down only about 3.8% year-to-date.
Major companies in the UK FTSE 100, such as BP and Shell, generate most of their revenues outside the UK. They report profits in dollars.
what you can do now
Doing nothing is not a bad option. When the coronavirus pandemic hit in late February 2020, the FTSE 100 plummeted from 7,450 to 5,190 in a matter of days, a 30% loss. However, by January 2021, it exceeded 7,400. If you’re young, you should be able to survive the rocks and arrows of tremendous fate in the market in the long run.
The motto of Terry Smith, the UK’s most successful money manager, Fundsmith, is ‘buy good companies, don’t overpay, do nothing’.
pay more in pension
This is almost always wise if you have spare cash as you can get a tax deduction of 20-40%. Your contribution today will buy you stock for much less than you did a year ago. Ask your company if it has additional matching voluntary contribution plans.
cash in
Most corporate pension plans allow employees to allocate their money between bonds, stocks and cash. If you really believe you’re headed for Armageddon, you can keep the full amount in cash, but luckily the annuity he’s getting more than 0.5% interest, and if the market rises again, he’s going to lose a lot of money. It will be.
buy gold
Gold, usually a safe haven in stormy times, has indeed fallen. In dollar terms, it is now at $1,651 an ounce, down almost 20% since March this year. However, when converted to pounds, it was roughly flat over the same period at about £1,505 per ounce. This shows how much the pound has fallen, not how gold is viewed in the global market.
What if I want to make quick money?
The FTSE 250 Index is a bargain by today’s standards. In Europe, his Ibex 35 index of large Spanish companies also fell sharply, dropping about 30% from 2018 levels.
Many US tech stocks have fallen sharply. Netflix and Facebook are down around 60% this year, while Amazon and Google are down around 25-30%. You’ll laugh if they repel – but not if Sterling repels too and wipes out much of your profit.
investment method
Want to buy stocks and funds online? Read this guide from The Guardian.