Looking into 2009

With the new year upon us it isn’t looking terribly bright. The British Government is following the same policies it always has despite the rapid downward trends of the global economy. These same policies are the ones that have left the country fundamentally weak and crippled, policies that were meant to make the country grow and prosper have failed. In their pursuit, the government has failed to put money aside for hard times and instead spent, spent and spent.

Now it is savers that are expected to bail the country out, the very people that have not contributed to this problem are the very people that are now going to be penalised as they help bail out reckless borrowers and the incompetant government. In addition to this the higher band tax payers are also going to be penalised, not only will their savings income be reduced but they will also be taxed more.

The lower interest rates have not yet been truely relected in peoples savings accounts, indeed when they are, in my opinion they will not offer an effective investment. Indeed I think we will see these savings options being outstripped by the rate of inflation. It is therefore time to seek alternative investment opportunities.

I believe the best place to invest at this point in time is in fixed interest coporae bonds & gilts. They lock you in at a decent and fixed rate of interest and currently are very well priced, though as more people jump on the bandwagon this will change as prices will be pushed up. This rise in price however, will be a good increase in investment if you are already aboard. For those of you in the UK the best place to house these investments is within your stocks & shares ISA’s and your SIPP’s. This tax free haven combined with the fixed interest will make coporate bonds and & guilts one of the best investments in 2009.

Kaupthing Edge in Administration and Acquired by ING Direct

I’m sure I don’t need to speak about the current global economic issues, though maybe for our American readers it is pertinent to mention that this crises does stretch outside of America. Most notably of late is the Icelandic economy which is probably one of the worst hit outside of the United States.

Both of it’s big banks, Kaupthing Edge and Icesave have been big business here in the UK for their very attractive interest rates, however, both are now in extreme difficulty. As a Kaupthing Edge customer I am going to concentrate on their current situation and how this crisis affects us here in the UK. The Icelandic government’s promised to protect all Icelanders’ savings but this isn’t thought to extend to UK savers. However, Kaupthing Edge was regulated by the Financial Compensation Scheme which has recently been extended to £50,000 per customer per bank. Quite simply, if you have less than £50,000 in Kaupthing Edge then you are 100% safe.

Luckily you don’t need to look into financial compensation as of the 8th October 2008 Kaupthing Edge is now owned by ING Direct as discussed in a statement from HM Treasury:

Kaupthing Edge deposit business has been transferred to ING Direct, a wholly-owned subsidiary of ING Group, which operates through its branch in the UK. ING Direct is working to rapidly ensure that it is business as normal for all customers.

Is my money safe now under ING?

Essentially yes, although ING has confirmed that we are now protected under the Dutch Investor Protection Scheme. Note that this is now a UK protection scheme and in the very unlikely event ING was to go bust, 100% of the first €100,000 (approx £78,000) will be covered. However, the claim for this money will need to be made with the dutch authorities.

I know this article isn’t about ICESAVE but what about them?

Well if you were with them you really were in trouble and the bank is now in the hands of the Icelandic government. However, the UK government today announced that it will secure all deposits with 100% backing:

The UK authorities expect that Landsbanki will soon be declared in default. Should that occur, the Chancellor has put in place arrangements to ensure that no retail depositor will lose any money as a result of the closure of Icesave. The Treasury and the Financial Services Compensation Scheme are working with the Icelandic authorities and their Deposit Insurance Scheme to ensure that depositors are paid back as quickly as possible. The Chancellor has also spoken to the Icelandic Finance Minister about the importance of the Icelandic authorities ensuring that UK depositors in Icesave are given the same protections as depositors in Iceland and receive their deposits back in full promptly.

So there is no need to panic with either of these banks. However, it will be interesting to see what ING Direct does with our interest rates and at the time of writting this article I am still trying to contact them to find out. Obviously today is not a good day to do so as the number is permanently engaged, however, if you have any worries or concerns as a Kaupthing Edge Customer you can contact them on 08451 31 32 34. You can also find more information HERE.

Free at 45 Now on the iPhone and iPod Touch!

I have been an iPhone user since it was first launched in the UK. One of the nice features that came in a January software update was the ability to save an icon on your home screen that relates directly to a website. This allowed you to easily launch and few a site with one push of your finger. 

A couple of weeks ago I had an icon made by Arron Hirst from RazorianFly. Arron is responsible for most of the graphics you see on my sites, mainly the icons, banners and post banners. I hope he continues to provide me with these excellent graphics for shameless plugs on my sites

Arron will soon be starting up his own graphics design business which I hope will continue to provide Free at 45 with great, simple and clean graphics. Who knows, if the site becomes popular I may even be able to pay him, but that wouldn’t be frugal, or help me retire at 45

To place the Free at 45 webclip icon on your desktop you need to follow the steps below:

1. Navigate to Freeat45.com with mobile Safari.
2. Hit the plus button on mobile Safari.
3. Select ‘Add to Home Screen‘.

Ways to Improve Your Investment Performance

Probably the best way to make a significant return over time is to invest in the stock market. In the UK an investment of £10,000 in 1977 would be worth £62,680 (at Bank of England Base Rate) via regular cash savings accounts but £621,411 had that money been invested in stocks and shares. Clearly something so attractive is also very risky. For me to retire at 45 I have had to take the risky route, though I confess I am far from an expert. As such I am not investing in individual stocks but funds (Mutual Funds in the USA?).

These allow me to pick where my cash is invested, but then allow a professional fund manager to manage that particular portfolio. For example, given the increasingly westernised diet of China, India and other developing nations and the relatively poor yields due to adverse weather, I realised the potential for massive growth in the agriculture business. As such I invested in Sarasin Agrisar Fund. Whilst currently taking a dip it did yield some results before the latest economic downturn, it’s a specialist investment and I am in it for the long term but I see great potential in it.

Given the current economic situation it is probably quite easy to understand why people panic and start to move their investments around, this could actually be doing you more harm than good. Have you ever thought that if your investments are in managed funds that this economic downturn could actually benefit you?  Here are some tips to improve your investment performance.

Automatic Contribution

The obvious point from this is that you should be saving a regular amount each month as its a quick and easy way to build wealth. However, there is an added bonuses to contributing regularly with an investment:

• Spreading risk. Instead of investing £10,000 (or $) in one single lump why not invest it over 10 months at £1000 a month? This will help lower the risk to the volatility of fund prices.
• Bagging a bargain. I may be wrong, as I stated I am not an expert however at least here in the UK I see no way that a particular fund I am invested in goes belly up. All are significantly widely invested to weather the storm, plus there is an expert managing them. The major plus in this storm however is that my £320 a month didn’t buy me half as many fund units as it does now and with my brokers reckoning that when the markets do return and they level out that my potential gain could be as much as 30%, I think I maybe quids in!

Automatic Reinvestment

Works simply on the principles of compound interest. Currently my broker has been instructed to automatically reinvest any dividend pay outs back into my investments which should make my final payout more fruitful. 

Asset Allocation

It is important to take stock (No pun intended) of your portfolio at least once a year. The traditional advice is to look at your exposure to various markets, decide on what your optimal portfolio is, based on the risk your willing to take and the markets performance and allocate accordingly. Sounds easy right? 

Well actually if your playing with funds like me it can actually be quite hard. Looking at the breakdown of these funds on a 3 monthly basis I was noticing that the fund managers were varying the geographical diversification of my investments quite heavily. For example my Neptune Russia and Greater Russia Fund whilst on the surface would indicate investments in Russia has actually only 78.37% invested there at the time of writing. My advice is to therefore not look at the funds on a macro level but the bigger picture of their fund type, UK Equities, Specialist etc and allocate in that manner. In the current situation I would also advise on looking at your portfolio maybe every 3 months with changes (If needed) every 6-12months.

Lower Your Expenses

Actually my last point covers this one pretty much fully. Many people panic when they see a fund or stock price drop, why are these people investing if they can’t take a loss? Don’t move things around to much it costs you money! The stock market always has and always will be a long term investment. Buy low and sell high is possible but not a game you should be playing with anything but a small amount of play money. For investing in your future you should be looking at investing for 5-10 years minimum. Other tips to lowering your costs:

• Scrutinize annual charges. Currently, on my self invested pension plan (SIPP) I am paying 0% on cash and 0.5% on all investments + VAT up to a maximum of £200 + VAT per annum. 
• Fund dealing costs. This is free for me and a major bonus which also makes moving my portfolio around easy and attractive to do.
• Fund initial charges. These can be a bit of a sting so look out for them. 
• Fund annual charges. This is separate to my broker and is charged by the fund themselves. It’s the fee to the managers for, well, managing! I tend to think that cheaper is not always best here.
• You can also seek to choose passively managed funds over actively managed ones to save a pound or dollar or too.

Tax Savings

Here in the UK there are many ways (Unbelievably) of keeping your cash and investments from the taxman. This section is probably best separated into UK and US parts. 

- UK

• You can invest upto £7,200 in a stocks and shares ISA. This is a tax free wrapper, use it!
• SIPPs provide basic rate tax relief, for example, invest £8,000 and the government will top it up by £2,000 to make your total investment £10,000.
• It gets better, if your a higher rate tax payer you can claim this back via your tax return meaning if you invest £6,000 your investment will turn into £10,000.

In summary, if your close to retirement (5 years or under) you may well want to think about moving your investment around or pulling it out into cash depending on how much you have already lost. If your over 5 years to retirement hold still and ride it out, my predication is that things should start to correct themselves in the early half of 2009.

Do any of you have any other ways to improve investment performance both in bad times and in good? Or have I got any information wrong in my post, i’d love your feedback and comments.

Controlling Weeds The Natural Way

Weeds are something everyone will have problems with at some point in their lives. The typical solution is to nip to the shops and buy some hardcore chemicals to nuke them. Pause right here for a second….

Just the other week a relative had done just this, £3.25 (~$6) for a spray bottle of weed killer and by the looks of the garden it didn’t help too much. Now, I have recently joined the ‘green bandwagon’ and hate to see chemicals poured onto the ground almost as much as I hate to see the plastics used to make the bottle and the processes used to make the chemical itself. Add this to my natural frugal ways and I was on a mission to find a cheap and natural wake to ‘nuke’ the weeds.

The solution was boiling water. Yes you read right, boiling water. How after 25 years of walking this planet did I never think of boiling water to do the job? If you poor boiling water on any living thing you will severely damage it and most likely kill it so the same must go for weeds. Well I boiled the old kettle and gave it a go.

You take the boiling water and ideally pour it on the surface of the leaves since they are the structures that produce food for the weed, killing these limits the energy of the weed to recover. Pouring a good amount around the base so it soaks into the roots is also a good idea. Some perennials (dandelions) may still re sprout as they have very deep roots. If you have the space to dig a trench around its roots to help your water get in there then you stand more of a chance of completely nuking even the hardest of weeds.

Free at 45 Launches!

It’s September 7th 2008 and I have just launched “Free at 45″, my blog that let’s you follow me on my journey from a recent graduate at 25, to retiring at 45.

The site will detail how I have done it, as well as providing you with information, tips and reviews that you can use to help you in your financial goals no matter what they are.

I’ll say goodbye for now but please subscribe to this blog, I promise you won’t regret it