Why did you write this book?
I wanted to pass on the knowledge I had gained as a businessman and a stockbroker, to the younger generation.
I believe that the demographic shift to a larger percentage of the population being of pensionable age will necessitate reduction in state and corporate pensions. It is therefore essential to start early in one’s working life planning and saving for a comfortable retirement. This book is written with the object of awakening the mind to the ways and means of achieving this objective.
What are the three most important aspects of financial planning?
- To set a target for the level of contentment on the hill of affluence. This can be adjusted as life progresses and one’s financial circumstances change.
- To seek the best tax planning advice in order to achieve one’s investment objectives. This should be updated regularly as governments are constantly adjusting pension legislation.
- In order to combat inflation look for investments where income is linked to the Consumer Prices Index or Retail Prices Index, such as rental properties. Many big quoted companies have records of dividends being increased at least in line with normal inflation rates.
What are the major pitfalls to avoid?
- The temptation to put all your eggs in one basket. Whether investing direct or through advisers, diversification is sensible.
- Believing everything you read. Remember journalists have to write for a living!
- Statistics are great but only if the parameters are identical. Be sure they are when comparing fund or stock performances. Even changing the starting dates within a calendar year can make a substantial difference to performance.
How do you see the investment outlook?
From a political point of view the uncertainties surrounding the Ukrainian and Middle East situations, the pending mid-term elections in America, and the Scottish referendum will tend to prevent a rise in US and European markets.
Economic news, however, is more positive, but any rise will be overshadowed by political worries. I am still hopeful that by the end of the year UK investors will see a return in excess of inflation, as the yields on UK equities are stable. The return on gilts and cash are so poor which means that more money is likely to be invested in equities. Prices should rise modestly and give an overall return in excess of 5%.
Tim is a director of an investment company, a property company and a document archive business.