Category: Investing

Just because the markets change, you shouldn’t follow.

Back in December I wrote a blog regarding my Top 10 Investment tips. A blog designed to give you a guide to investing in the stock market and, more importantly, some practical advice on how to swerve some of the more avoidable traps that can lay in wait.

My Top 10 were:
• Embrace Market Pricing – it knows the worth of a stock
• Trying to outguess the market isn’t a sensible strategy
• Past performance is no indicator of future positions
• Play the long game and let the markets do the work
• Have a look at the woods as a whole, not just the trees
• Fish in the wider oceans
• Try to avoid bandwagons
• Keep your emotions out of your investments
• Don’t believe all that you read in the papers
• Stick to your plan – focus on staying on course

The full blog can be found here:

A little insight into the great investment question

However, with the ongoing volatility and distractions in and around the markets, I thought that I might just reiterate one or two important points regarding holding your nerve.

2B or not 2B?

I’m sure that when Shakespeare wrote that he didn’t have Bitcoin or Brexit on his mind. However these two modern days B’s seem to be claiming most of the financial headlines at the moment. On one hand Bitcoin seems to be the answer to everyone’s prays. Presented as a get-incredibly-rich-quick scheme that seems like a no-brainer, but you have to ask who’s really making the money now. The simple answer may lay at the feet of those brokers who are trying to drive investment in the commission-rich bubble that is Crypto Currencies. Yes, the history of Bitcoin growth is phenomenal, but as I said previously ‘Past performance is no indicator of future positions’ and you should always ‘Try to avoid bandwagons’. Couple that with the fact that Bitcoin lives in the dark web (the domain of criminals and terrorist) and you have to also ask would you trust any investment made where organized crime lurks in the shadows?

Brexit is another big distraction for the markets. Ask yourself if anyone really knows what’s going to happen after Brexit. I’d argue that, given the fact that no one yet knows what the terms of Brexit will be, it’s impossible to know what impact Brexit will have on the markets.
We all know that fear helps sell newspapers, which is why the newspapers love stirring-up doubt and fear over the negotiations with the EU and what that will mean to all our futures. Again I remind you of one of my Top 10 Tips “Don’t believe all that you read in the papers”.

Plain sailing or stormy waters?

Ultimately how bullish you are is a matter for you. But I would advise that changing a winning strategy just because the markets are a little volatile is unwise. Even the most bullish captain would find it hard to justify steering towards a storm, just to see if there is some opportunity to catch some strong winds in the sails. It’s not an option for traversing the seas and certainly it shouldn’t be an option for navigating the markets either.

In turbulent times, we batten down the hatches and ride out the storm. It’s exactly the same for the markets, you sit tight and wait for the markets to settle. Again, as I said in my Top 10 Tips “Play the long game and let the markets do the work”.

Keep calm and carry on

Back in December I finished my Top 10 Tips with this piece of advice: “Stick to your plan – focus on staying on course”. Nothing has changed. You should always focus on what you can control and what your long-term investment strategy is. Stick to what you’re doing and avoid reacting to movements in the market, no matter what Joe Public is saying.

If you’re looking for advice, then get it from someone who knows. Speak to your adviser about elements of your investment strategy that might concern you, or ask them about the ‘golden opportunities’ being presented to you. Either way they will be able to share some emotion-free expert insight, based upon long-term investment strategy and researched market knowledge.

Always remember – there’s no such thing as a silly question

When it comes to your finances, if you want to know more, please ask. Your adviser is there to help guide you to the many opportunities that present themselves and to steer you away from the pitfalls. If there is anything you’re not sure of, or you wish to discuss an opportunity that you believe the markets present, then speak to a qualified adviser. If you don’t currently have one of your own, then please don’t hesitate to contact Bridgewater Financial Services, as we will be only too pleased to help.

A little insight into the great investment question

Can we really beat the Markets?

Over the years, and because of the vast sums of money involved, top investment companies,
governments, national banks and academics have carefully studied the investment markets.
Consequently there is a vast body of research out there that carefully looks at investment
strategies, as well as the markets in general. So I’ve taken the trouble to sift through the
mountains of information, hints, tips, guides and strategies in order to produce this Top Ten
Tips of perceived wisdom.

1 Embrace Market Pricing – it know the worth of a stock

In 2016 there were 82.7 million trades every day across the world’s exchanges. That’s an
incredible £280Billion worth of activity, each done on the back of new information. The market
reacts to these trades like an enormous information processing machine, which in turn sets
the current price. As no one knows what the next trade or piece of information will be, the
future price is always uncertain. But in this uncertainty, the market price is always the best
indicator of a stocks actual value. To go against this would mean pitting yourself against the
collective wisdom of the marketplace.

2 Trying to outguess the market isn’t a sensible strategy

Whilst there is never a guarantee that any investment strategy will be successful, assuming
that you can identify mispriced stocks and take advantage of the low price is flying in the face
perceived wisdom. Research proves time and again, that market pricing works against
individuals and even mutual funds that attempt to outguess the market.

3 Past performance is no indicator of future positions

Whilst it may seem a prudent investment to select funds based upon track record, research
shows that there is strong evidence to avoid investing on this criterion alone. Think about how
much the world has changed in the past year or so, combined with how unsettled things still
are. Previous returns are from a different economic and political situation and may not be able
to be repeated.

Some fund managers may also be better than others, but past performance alone is not a
reliable indicator of future results, with some impressive past returns possibly being just down
to luck. The understandable assumption that past performance will continue unabated often
proves incorrect and can leave investors both puzzled and disappointed.
4 Play the long game and let the markets do the work

If you are intending to use the financial markets as a wealth creator, then the good news is
that the capital markets have always rewarded the long-term investor.

The markets are a manifestation of capitalism at work in the world’s economy. The great
news for investors is that historically, free markets provide a long-term return that offsets
inflation. You can see this in the growth in the performance of a £1 investment in UK small
cap stocks and value stocks over the past 50 years. A pound invested in the whole market in
1956 would be worth £1,000 in 2016; compared to £4,012 for value stocks and £7,643 for
small cap stocks.

5 Have a look at the woods as a whole, not just the trees

Academic research suggests that, instead of viewing the market opportunity in terms of
individual stocks and bonds, we should approach the market in a way that allows us to have a
broader view and identify investment ‘factors that have linked characteristics. Factors are
defined as any aspect of an investment that is backed by robust data, both over time and
across the market.

In Equity Markets the key factors would be size (small cap vs large cap), price (value vs
growth, momentum(the surge effect seen in rising markets)) and profitability (high vs low).
In the Fixed Income Market the factors would be term and credit quality.
If you decide upon a factor-based approach, then your returns will not be based upon which
stocks, bonds or market areas will outperform in the future. Your goal would be to hold a well-
diversified portfolio that emphasizes higher expected returns, controlled costs and a low

6 Fish in the wider oceans

Most people seem to only invest in their country’s stock market. In the UK this might mean
that they only ever pick UK stocks and mutual funds, yet still consider their portfolio to be
diversified. However, this limiting of the investment into one market can lead to problems with
possible implications to risk and return.

If you think about the uncertainty in the UK as we negotiate Brexit, then you may begin to
understand why diversifying out of the UK could be worth considering. Research suggests
that a global diversified portfolio should be structured to hold multiple asset classes, that
represent different market areas across the world.

7 Try to avoid bandwagons

It’s because we never know which market segments will outperform expectations that it’s
considered a good idea to hold a globally diversified portfolio, so that we ensure we are well
positioned to enjoy returns wherever they occur. As there is a strong case to support the
notion that investors should rely upon portfolio structure, rather than tempting market
movements, or the sudden rush towards a particular investment.

8 Keep your emotions out of your investments

If your strategy is to be in it for the long-term, then don’t let your emotions take over. A good
example of the dangers of letting your emotions rule can be seen in the 2008–2009 global
market downturn. Fear drove some investors to sell up and get out of the market.
Unfortunately for them, as the rebound began, they had already locked in their losses and
had to sit and witness the market’s climb back.

Understandably people can find separating their emotions from their investments a difficult
thing to do. As by their very nature markets go up and down, investors can find themselves
on a psychological rollercoaster. However an emotional reaction to any current market
condition may lead to a poor investment decision. Staying disciplined and sticking to your
strategy is crucial for long-term success.

9 Don’t believe all that you read in the papers

Newspapers don’t sell and television news isn’t watched unless there is some emotion and
sensation around what is being reported. Don’t let market commentary challenge your overall
investment strategy.

If headlines start to unsettle you, try to maintain your longterm perspective. Sustaining a
growing portfolio and increasing your wealth has no shortcuts. It requires a solid investment
approach, a long-term perspective, and the discipline to stick to your strategy.

10 Stick to your plan – focus on staying on course

Always focus on the elements of your investment strategy that you can control and try to
avoid reacting to fluctuations in the markets. Work with your adviser to create and maintain a
long-term investment plan, based on market principles and informed financial research. Make
sure your plan continues to be tailored to your needs and goals. Structure your portfolio along
the dimensions of expected returns. Diversify globally and stay disciplined throughout the
various market conditions you will face.


As always this blog is written to enlighten and inspire you to consider the options available to
you. It is not meant to be financial advice. For that you are very welcome to contact us for a
free initial consultation.

The Chancellor’s Autumn Budget 2017

The Rt Hon Philip Hammond MP

Following a turbulent few months across The Palace of Westminster, with a call for more spending and a more aggressive approach to growing the economy, the Chancellor’s budget was largely seen as a business as usual approach, albeit within the ever-present shadow of Brexit.

So now that Philip Hammond has had his day in Parliament, let’s see what kind of impact it’s going to have on yours.

Well firstly, there were no significant announcements regarding tax or pension changes. Nor was there anything that set the markets alight, or sent them into free-fall. In fact this market apathy was manifested in the non-movement of the FTSE 100, Benchmark 10 year Government bond or guilt and with the pound largely static during the Chancellors hour-long delivery.

What the Budget might mean for you


Your personal income tax allowance is set to rise to £11,850 for the fiscal year 2018-19 throughout the UK apart from Scotland. As Scotland will set its own personal tax threshold, should it choose to, in the Scottish budget due on 14 December.

The higher rate of income tax in the UK will rise to £46,350 for the fiscal year of 2018-19. Again with the exception of Scotland, who may address this in their impending budget.


First time buys will not have to pay Stamp Duty on properties up to a value of £300,000, which would also see those buying properties up to £500,000 paying no stamp duty on the first £300,000. A move that should benefit 95% of first time buyers


The pensions lifetime allowance will rise in line with the consumer price index to £1.03Million. One highlight for pensions is that there will be no changes in the pensions funding limits, with the annual allowance remaining at £40,000 and not tapered until adjusted income exceeds £150,000.


The Junior ISA limit is set to rise to £4,260. Whilst the overall ISA limit will stay at £20,000 of which £4,000 can be paid into a LISA (for those eligible).


There will be a £400 increase in the capital gains tax allowance, seeing the threshold rise to £11,700.


The nil band rate for inheritance tax will remain at £325,000 until April 2021, with the residence nil rate band increasing from £100,000 to £125,000. Which means that, in the future, couples can leave assets up to £900,000 to future generations free of inheritance tax liability.


Although no specific details were announced, there is a planned consultation, to be published in 2018, which will consider the simplification and fairness of trust taxation.


The UK Stock Market was largely indifferent to the Chancellors speech. In fact, when he stood up to speak the FTSE100 was trading at 7,448 and when he sat down an hour later, it was largely unchanged.

The real movement in the market came about through the changes in Stamp Duty. With large house builders witnessing their shares drop between 1% and 3%. Possibly reflecting some disappointment in the detail of the chancellors £44 Billion Housing Package, along with the lack of an extension to the popular Help to Buy scheme, compounded with an investigation into the speed at which permitted land banks see the building of new homes taking place.

In true Stock Market traditions, where the tide goes out for one group, in it comes for another.
With the increase in the Stamp Duty it is widely believed that we will see a reinvigoration of the housing market, as well as the driving up of house prices. All this leads to higher profits for Estate Agents and, as a consequence of that, national chains saw an increase in the value of their share price.


The downgrade in the UK’s GDP growth forecast for the next three to four years, along with the rest of the budget, went through without any real reaction from the currency markets. With Sterling ending the budget in much the same place as it started against the Euro and Dollar.


All in all, the Chancellor delivered a steady budget, without any radical changes to the landscape. As always, if you have any questions regarding a specific area of the budget, or your own personal circumstances, then please don’t hesitate to get in touch, where we will be happy to help you in any way.

The Rate Rise is here – but what does it mean?

Well we all new it was coming, but what now? What does the first interest rate rise for more than a decade mean for you?

Despite the fact that it’s a small increase from 0.25% to 0.5% it will have an immediate impact on UK households and businesses. On one hand it means higher costs for those with mortgages and other borrowings but on the other it’s better news for all those with savings.

Is it misery for Mortgages?

Mortgage rates will inevitably rise following the increase in base rate. The main group affected in the short term are those on a standard variable rate (currently average 4.6%), along with those who are on tracker mortgages, where rates are likely to raise this side of Christmas.
Although the scale of the rise is unlikely to push many people into hardship, as a 0.25% rise on a 25 year mortgage of £200,000 at a standard variable rate of 4.5 per cent means an extra payment of about £300 a year.

Is a Fixed-rate fantastic?

With The Bank of England announcing that further rate rises can be expected, brokers are anticipating a rush on fixed-rate deals of five years and over. Although over the last few months there have been a lot of fixed-rate product withdrawals and rate increases, as the banks anticipate the rush to a fixed-rate product.

Is it the right time to Remortgage?

Anyone looking to remortgage or move to a fixed rate can still access the historically low rates available in the market, with two year fixed-rate deals available at 1.09% or fixed for five years at 1.68% for those with a 40% deposit.
It is generally thought that borrowers should be encouraged by the comment accompanying the announcement by The Bank of England “The expectation at the moment is that the speed of future increase in rates is going to be relatively slower than we thought.”

Is it super for Savers?

For those living with near non-existent returns over the last few years, it would seem like welcome news. Although that depends upon whether the banks choose to pass this increase onto their customers. A move looking increasingly unlikely, as the link between base rate and savings rate appears to have been severed sometime ago. Following the announcement, the Nationwide says the “majority” of its savers will benefit from a rise, while Newcastle Building Society and Yorkshire Building Society pledged to pass on the full rate rise to all savers. So it’s not a clear rate rise for every saver in the UK. One to watch carefully!

Is it perfect for Pensions?

With annuity rates closely linked to movements in interest rates, according to experts, the rate rise is likely to be fed through resulting in higher income for pensioners.
Richard Eagling of Moneyfacts suggests “The interest rate rise is good news for those on the verge of retirement who may be looking to secure an income through an annuity, as it is likely to boost gilt yields, which underpin annuity rates.”

Is it time up for Transfer Offers?

The rise in the interest rate is more than likely to end the record high transfer offers currently available to members of defined benefit pension schemes. Head of Royal London, Sir Steve Webb says “The one group who may be concerned by today’s news are those planning to take a transfer from a final salary pension. Transfer values are likely to track down as interest rates rise. Anyone considering a transfer may wish to take impartial advice on the pros and cons of a transfer as a matter of urgency, as transfer values are unlikely to remain at today’s very high levels.”
So if you’ve been considering your potential transfer value now is the time to look at what the opportunity might be, before the rate rise causes an end to the current offers, that can be 30 or 40 times projected pension income.

Is it interesting for Investments?

The markets have already priced in the rate rise decision, so it is predicted that there will be little impact on stock prices in the short-term. With political uncertainties like Brexit still having an affect on company’s ability to make investment decisions.

Is the Rise repeatable?

It’s because the Bank of England is forecasting inflation falling below 3%, that many believe that further rate rises in 2018 are unlikely. On-going increases risk slowing or halting an already weak economy, currently experiencing the uncertainty of Brexit. So the feeling is that this rate rise is probably going to be an isolated incident, until Brexit is behind us and the economy is more stable.

Elections and Referendums

Just when you think you’ve seen enough of elections and referendums, they’re starting to appear like busses.

Rollercoaster Elections Referendums

Here we all go again!

It seems like only yesterday that David Cameron and Ed Miliband were battling for the keys of Number 10. Then, just as we all got our breath back, we had the EU Referendum.

Hot on Brexit’s heals, we then witnessed President Trump’s march toward The White House. Right now the EU is in the midst of it’s own electoral battles and Turkey is undergoing historic changes that may well bring about fundamental alterations to it’s constitution.

So with all that literally days behind us, Teresa May has now announced a snap General Election for June 8th.

So, what does it all mean for our investments?

Not so steady as we go.

We all know that the markets love stability and that we haven’t had very much of that recently, but things were starting to settling down. Granted there is the sabre rattling regarding Brexit and the UK’s future economic relationship with Europe – but there always has been.

It can’t be good for business though. As we all know that political uncertainty leads to a volatile market. However, we need to remember that political uncertainly doesn’t last, but the markets do!

It’s fair to say that changes in the status quo often disrupt the domestic and international markets, especially if the changes are unexpected or seem to signify a departure from the established order of things. Couple that with the fact that many observers are pointing out that the political and economic landscape of Europe hasn’t changed so much since the end of the Second World War. What is happening in the UK, Europe and America is huge and no one knows exactly where it will all settle. But settle it will. And when it does the markets will adjust themselves, dust themselves down and go about their usual business.

The markets love time more than politics.

Analysts tell us to take great comfort by looking back at long-term market performance. For when we examine how the markets behave historically, the further back we go the more we see steady growth.

In saying that, it doesn’t mean that growth was more assured or stronger years ago. What it means is that if we look at the markets over years rather than months, then the robust nature of investment growth becomes apparent.

It’s by looking back in time that we can clearly see that investments generally return the best options in order to grow a lump sum of cash. This knowledge should arm us with the confidence to look to retaining our market positions in times of uncertainty.

We may not all share the same politics, but we’re all in the same boat.

We are all facing uncertainty. We are all second-guessing the results of the General Election. What that will mean to Brexit? How will the victors navigate the UK on it’s maiden voyage as an Economic power in its own right?

But take comfort in the fact that the markets are used to uncertainty and they can cope with it way better than us mere humans. Just think of the markets as a reflection of life and society. They have their ups and downs and often face periods of calm certainty as well as violent change.

Our approach is evidence-based, long-term buy and hold, concentrating on getting the right mixture of risk and return for our clients. Essentially this is a ‘steady as she goes’ approach which avoids market timing or stock selection as far as possible since these have not been shown to add value. This has generally served them well over time. Unless people’s goals have changed, we do not advocate any changes in the levels of risk taken. We have already made changes to our portfolios to remove the bias to UK equities and these are being rolled out through our regular client review process. So we are not complacent but we do base our approach on our understanding of the long term behaviour of the markets.