My anxiety as a personal investor is rising at the same pace as world stock markets, unemployment, public sector debt and house repossessions. And the scale of the pension fund black hole actually seems to have induced one pension trustee to write to me for a second time in one financial year(!) - to remind me I can "change my investment choices". My gut tells me it's all going to get a lot worse and for a long time, before it gets better - and so does Bob Prechter, to name but one of many pundits:
I do my best to keep track of various small investments in numerous pots that have accumulated over the years - several ISAs, pensions (corporate, SIPP and stakeholder friendly) and child trust funds. I even move them around over the flames from time to time, in the hope that at least one or two will ignite. But none has yet paved the way to retirement, let alone a comfortable one.
So what changes should I be making to my investment choices?
The first step in any such undertaking is to figure out exactly what each investment is worth... and whether I'm ahead...... Or not.
And right there the whole personal investment management process comes to a juddering halt.
Because not all of the relevant information is in the one place, and some of it is downright difficult to obtain (when one confronts the different ticker symbols that pension providers use, for example). So there are always a few funds kind of drifting 'out there' that you learn about every 18 months from some forlorn pension trustee somewhere.
And figuring out whether your 10, 20 or 30 different funds actually represent a diversified portfolio, or ultimately all track each other, is no easy task for an amateur. In fact, the pension trustee who wrote to me recently didn't even suggest I try.
The product providers and IFAs can't really be expected to take a huge interest in your mish-mash of pension and non-pension, taxable and non-taxable investments (and let's not forget the mortgage albatross or any other liabilities you thought were assets). They tend to earn fees simply based on how much of your money they have 'under management'. So if your investments are scattered to the four winds, the revenue they earn from you is disproportionate to the work required to pull all the information together. In fact, it may not even be cost effective to pay the fees for an adviser to do a proper job.
The FSA has just spent oodles of time and money reviewing retail distribution to try to resolve this issue, and they've made some progress, but ultimately it seems an impossible task. Consider that the FSA's own "MoneyMadeClear" website has different tabs for pensions, as opposed to savings and investments - when in both cases you're simply 'investing', and your money could end up in the same place through either channel. And the FSA's review basically ignored any asset offered by a provider that it doesn't regulate, including all consumer credit - its remit and resources prevent it from seeing the financial world holistically. It's a fool's paradise, as I've pointed out before.
So let's face it: you are on your own. Pay less, diversify more and be contrarian.
Now I don't think I'm unrepresentative of a good many people over 40 who have a bunch of stray investments that are only going to grow in number, but not necessarily in size, and who know they really ought to be doing something to keep it all under control. I'm aware of services that go part of the way, but no one-stop, low-cost service that would allow you to track all your savings and investments, whether in or outside pensions, taxable or non-taxable; understand whether they're up, down or sideways; benchmark them against competing options; assess whether you are really diversified; avoid the pitfalls of transfer fees, and dealing charges that hammer nails into some apparently cheap options (e.g. I'm told not to trickle money into ETFs); and cost-effectively trade your way out of any holes.
All in a single afternoon.
But here are some examples of the elements that would be worth combining, even if initially that's in something like a Netvibes or iGoogle screen - other suggestions welcome - :
So what changes should I be making to my investment choices?
The first step in any such undertaking is to figure out exactly what each investment is worth... and whether I'm ahead...... Or not.
And right there the whole personal investment management process comes to a juddering halt.
Because not all of the relevant information is in the one place, and some of it is downright difficult to obtain (when one confronts the different ticker symbols that pension providers use, for example). So there are always a few funds kind of drifting 'out there' that you learn about every 18 months from some forlorn pension trustee somewhere.
And figuring out whether your 10, 20 or 30 different funds actually represent a diversified portfolio, or ultimately all track each other, is no easy task for an amateur. In fact, the pension trustee who wrote to me recently didn't even suggest I try.
The product providers and IFAs can't really be expected to take a huge interest in your mish-mash of pension and non-pension, taxable and non-taxable investments (and let's not forget the mortgage albatross or any other liabilities you thought were assets). They tend to earn fees simply based on how much of your money they have 'under management'. So if your investments are scattered to the four winds, the revenue they earn from you is disproportionate to the work required to pull all the information together. In fact, it may not even be cost effective to pay the fees for an adviser to do a proper job.
The FSA has just spent oodles of time and money reviewing retail distribution to try to resolve this issue, and they've made some progress, but ultimately it seems an impossible task. Consider that the FSA's own "MoneyMadeClear" website has different tabs for pensions, as opposed to savings and investments - when in both cases you're simply 'investing', and your money could end up in the same place through either channel. And the FSA's review basically ignored any asset offered by a provider that it doesn't regulate, including all consumer credit - its remit and resources prevent it from seeing the financial world holistically. It's a fool's paradise, as I've pointed out before.
So let's face it: you are on your own. Pay less, diversify more and be contrarian.
Now I don't think I'm unrepresentative of a good many people over 40 who have a bunch of stray investments that are only going to grow in number, but not necessarily in size, and who know they really ought to be doing something to keep it all under control. I'm aware of services that go part of the way, but no one-stop, low-cost service that would allow you to track all your savings and investments, whether in or outside pensions, taxable or non-taxable; understand whether they're up, down or sideways; benchmark them against competing options; assess whether you are really diversified; avoid the pitfalls of transfer fees, and dealing charges that hammer nails into some apparently cheap options (e.g. I'm told not to trickle money into ETFs); and cost-effectively trade your way out of any holes.
All in a single afternoon.
But here are some examples of the elements that would be worth combining, even if initially that's in something like a Netvibes or iGoogle screen - other suggestions welcome - :
- FT.com - spend days finding the right fund names, ticker symbols and recording all your holdings using data from product provider web sites - remembering to record the trickle of reinvested dividends - and, hey presto, you can track the performance of your portfolio.
- Money Gym - hit the FT's gym to learn the basics of (some) asset classes.
- Yahoo's ETF Glossary - actually a useful repository of most investment jargon.
- Lower cost dealing - the devil's in the pricing detail, and you get no advice so have to know exactly what you're buying and why, but compare Motley Fool, The Share Centre, with those listed here.
- Comment and opinion from some top notch experts too numerous to mention here - not seductive stock tips (because I don't believe anyone should be relying on those unless they're sitting for 12 hours a day in front of 4 trading screens full of data to check them), but broader suggestions on how to view what 'the market' is doing, pitfalls, scams and so on.
- Books from said columnists and others who are aligned with helping you meet the real personal investment challenge.
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