Disclaimer

This article is for general information and educational purposes only. It does not constitute investment advice, a personal recommendation, or a financial promotion within the meaning of the Financial Services and Markets Act 2000

Readers should make their own independent assessment and where appropriate seek advice from an FCA authorised advisor.

Yield and Risk

The yield, also called the return, is the annual profit you make on any investment without there being any price change to the asset itself .You may use this information to compare investment options. But you must also consider other criteria when making comparisons. The liquidity of, tax efficiency and risk of holding the investment and the current level of inflation. A high-quality Bond Fund paying a yield of 6% may well be a safer investment than putting money into a non-quoted start-up business which offers 15%.

Compound Growth

This is the interest/growth (return) on the interest itself.

Example: If you invest £1000 at 10% the first year’s interest of £100 added to your fund gives a year-end total of £1100. In year 2 and without further investment, this £1100 at 10% generates £111 making the yearend total £1210 and so on.

Stop Loss To mitigate losses, you may set a ‘stop loss limit’ to trigger a sale at a certain price point to lock in a gain or prevent an unacceptable loss. All trading platforms offer this facility on shares, but you can do it manually on funds by noting an acceptable decline in any fund on your spreadsheet and deciding whether to initiate a full or partial sale .

Regular Monthly Investments It is impossible to ‘time the markets’ that is to know (except with hindsight) when to buy or sell. To further avoid the ‘fear and greed’ factor and even out trades you can institute a regime of regular monthly investments in selected funds. Check that this is available on any online trading platforms you use. Regular investing in this way is called ‘Pound Cost Averaging.’

Regular investing is a proven way of deploying Employer and Personal contributions into SIPP’s and your own into Stocks & Shares ISAs.

Re-balancing a Portfolio

Apart from the category reweighting covered in Module 2 you should periodically review your individual holdings.

Consider pausing investment in those which have done particularly well. We want to avoid any one asset representing too much of any sector holding. Look at those holdings that have performed badly against their sector peers and consider a full or partial sale.

Researching Sector Trends :- Examples

1.COVID 19 accelerated the demise of many High St Chains whilst boosting the online shopping trend. What is happening post COVID?

2. Sustainable Energy a growing sector worthy of further research.

3. Boost to the Health sector from new drugs and treatment anti COVID 19 virus success.

4. Artificial Intelligence potential has reinvigorated the Technical sector, but will all the companies involved find ways introduce it into mainstream life and to monetise their product?

5. Quantitative Easing Whereby major nations buy up long term debt from pension funds and insurance companies. This provides liquidity to the financial system to boost economic activity. What would happen if they reduced, or stopped this, as has happened in the past?

6. The current Middle East Conflict (March 26) with its short and long-term consequences.

7. Increase in defence spending by NATO countries.

Little is written for the public on how these world events effect financial investments. Investment Houses have teams of people working on these and other trends. By doing our own research we can look at how these play into our investment decisions.