Never Lose a Penny

Generally, people probably spend too much time trying to obtain more growth on our money than we do in looking after the security of our money.

The FSA have a favourite expression which is:

Not many people have a large capacity for loss i.e. they can’t afford to lose a great deal of money before it has an impact upon their financial security or lifestyle. Yet many people have equity based investments that sometimes surprise even the hardiest of investors with the volatility they possess.

However, even with the safest of investments it is still important fully understand the potential for situations to arise that could affect the value of your capital or efficient use of your income.

This site is dedicated to providing access to some of the securest investments available and to some of the best advice possible, but situations can still arise where your original capital value may be at risk.

Deposit Based Structured Products

These products are offered with specific investment terms, typically of 3, 4, 5, 6, or even more, years.

If you commit to one of these products and you find yourself needing access to the capital before the final agreed date of maturity, you are likely to find that you do not get as much back as you originally invested.

Therefore, do not encash or surrender these policies before the maturity date.

Annuities

You only have one chance to make the right decision on which annuity to choose. You will have to live with this decision for the rest of your life.

If you make the wrong decision you will have a lower level of income than the best that was available or you will be exposed to a higher level of risk on your capital than you realised.

Mortgages

There are three important factors to make sure you get right when choosing your mortgage:

1. Getting the type of mortgage right:
• Capital Repayment
• Interest Only
• Fixed Rate
• Variable Rate
• Discounted Rate
• Tracker etc.

2. Getting the term of your mortgage right. Extending the term may help reduce your monthly repayments, but because you are paying over a longer term, it could actually cost you more in the long run. Getting this balance right is therefore essential.

3. Getting the best rate of interest is important irrespective of the type of mortgage or the term of your mortgage.

Getting any of the above decisions wrong will cost you money.

Tax

The only rule here is – Never pay too much tax!

Make sure you fully utilize your ISA allowances for all of your savings!

Make sure you do not pay unnecessary inheritance tax:
• Use your nil-rate allowance when passing on your estate.
• Plan the allocation of your estate efficiently.
• Use your gifting allowances whenever possible.
• Don’t forget you have the capability to change the way any inheritances are received by utilizing the ‘deed of variation’.

Loans

Only borrow money if you have to.

Make sure you get the best rate available.

Make sure you choose the most appropriate term.

Consider securing the loan against your property to reduce the interest rate or even top up your mortgage if possible.

Credit Cards

Pay off your balance as often as possible to prevent the need to pay expensive levels of interest each month.

Do not be late in making your payments

Do not take cash from your credit card because:
1. You will pay a higher level of interest on these withdrawals.
2. You generally repay this loan after the costs of normal purchases have been repaid. This means you end up paying the higher level of interest for a longer period of time.

Equity Based Investments

These are the most risky kind of investment available to the regular investor.

Equity based investments invest money in all sorts of asset classes, each of which has its’ own investment and volatility profile.

The value of these investments changes on a daily basis.

If you encash your investment at a lower price than you invested, you will lose money.

It is also possible to lose money if you encash at a higher price if your investment value has been eroded by charges on the investment.