For those of you not acquainted with Trustnet Magazine, it attempts to offer a more colourful look at the world of funds and investment compared with this website’s relentless focus on data. Here are five stories that offer a flavour of what we have been writing about over the past 12 months.
Cigarettes & alcohol: How to make money from your vices
Many people promise to give up smoking and/or drinking for their new year’s resolution but lack the willpower to see it through to the end of January, never mind permanently.
If you find yourself in this situation and need an extra incentive to quit either vice, this article from the November edition of the magazine may be just what you need. Twenty-two years after Liam Gallagher of Oasis first sang “all I need are cigarettes and alcohol”, we find out how much he would have made since then if he quit drinking and smoking and invested the money in tobacco and beverage stocks instead.
The $64,000 question: How much money will you need in retirement?
John Blowers’ articles on retirement always prove popular and this one on the amount of money you will actually need when you stop working was the most read of the lot. Most people tend to put away what they think they can afford for their pension without considering whether it will actually be enough – and in most cases it isn’t.
Blowers looked at what £250,000 and £500,000 will buy you and how long these sums will last. While the guaranteed return from an annuity is pretty pathetic, the good news is that taking a flexi-drawdown approach makes everything look a lot more encouraging. His article on why even cautious investors should take on more “risk” in retirement explored a similar theme.
Money for nothing: Is active management worth paying for?
A common criticism of Trustnet and Trustnet Magazine is that we don’t write enough about passive funds. This isn’t because we have an aversion to these products, but because there is a view among journalists that there is little of interest to write about after the subjects of cost and tracking error have been covered.
However, Robin Powell, who blogs at The Evidence Based Investor, blew this argument out of the water with a lengthy and detailed piece on the actives vs passives debate. It was enough to make some of the committed active advocates on the editorial team re-consider why they have always preferred the more expensive products.
“Before costs, the return on the average actively managed pound will equal the return on its passive equivalent. After costs, the return on the average actively managed pound will be less than the return on its passive equivalent. Therefore, the average active investor must – no ifs or maybes, must – underperform the average passive investor,” Powell explained. “It really is that simple.”
A paper published by the FCA in November brought the actives vs passives debate to the fore once again.
The end of the rainbow: What to do with your (pension) pot of gold
While many people dream of retirement for all of their working life, Pádraig Floyd found out that you can’t rest on your laurels when you reach the promised land. Among the factors you need to consider when you are given access to your pension pot are the degree to which you wish to remain invested in markets, the amount of risk you are prepared to take, any loans or debts, any bequests you may wish to make and whether you have any healthcare issues.
Floyd found out you also need to bear in mind the wishes of your partner. Independent financial planning consultant Lisanne Mealing told him of “a definite atmosphere of hate in the room” when she met the wife of one of her clients to discuss his pension.
“This was because the wife knew there was a pot of money and wanted to convert part of their house for her parents, while the husband wanted to travel and do all the things he had not been able to do before,” she explained.
“He felt he had the controlling hand because it had been his pension, investments and savings and she had never had any income. However, as far as the wife was concerned, the agreement was that she would be the homemaker and give up her ability to earn and so expected a greater say in how it was to be spent.”
Published before the referendum, Cherry Reynard’s article, featuring both a reference to 80s electro pop and a striking image from our designer, predicted what would happen in the “unlikely event” that the UK voted to leave the European Union. A number of experts said that international earners would benefit from a weaker sterling, while housebuilders, commercial property funds and mid and small caps would all suffer.
Highlighting this article isn’t just an excuse to pat ourselves on the back about getting these calls right, however – it is worth remembering that we haven’t left the EU yet and you may wish to reacquaint yourselves with what the experts think will happen when we eventually do.