There have been many significant developments since our last newsletter:-

• The sovereign debt crisis - Threatens to replace the banking crisis with southern Europe as the focus, although the US and the UK have comparable debt levels.
• Dividend income - Those relying upon dividend income, having been severely hit by their holdings in banks, have now been hit by BP.
• Retirement - Pension costs have been forced up the agenda, so many (all?) will soon face later retirement and less generous provision.
• New Government - In the UK a new Government and new budget give food for thought.
• Risk - The world economy, recently surrounded by doomsday warnings, continues to avoid the worst of the predictions, yet there is still concern about risk, but there always should be as risk is always present – the difference now is that the risks seem more identifiable.

We always advise: “establish the level of risk you are comfortable with and stick with it” - but that does not mean do nothing.

• The sovereign debt crisis - growth will be limited by actions to reduce spending, but for the adventurous, depressed European asset prices and a weakened Euro may be an opportunity to increase exposure to Europe. Suitable funds are the easy way for most and there are several available.
• Dividend income - chasing “safe haven” dividend yielding stocks is always more risky than it seems for the individual investor and if you are “in” when the crisis hits (e.g. Banks, BP), you are trapped. If you need income, funds tailored to produce dividends are a safer way to minimise your risk.
• Retirement - Always the most important consideration and yet so often ignored. Cost pressures, lower returns, reduced tax allowance, delayed retirement, longevity, reduced annuity rates, etc. conspire to form a gloomy picture, but do not strengthen the case for doing nothing. Doing something is better than nothing, always. Keep retirement high on your list for your planning or for discussion with your adviser.
• New Government – Actions to reduce the deficit probably mean that interest rates will remain low for longer and growth/income elsewhere risky to chase. Cash is an essential element in any plan, and the closer you are to retirement, generally the more proportionally you should hold. Therefore, make the best of it. Move savings (and importantly ISAs) around to maximise interest. Make the most of tax free savings if you are a taxpayer (NS&I, ISA’s) to minimise the effect of tax upon already low interest rates.
• Risk - Low returns are tempting many clients to consider significantly increasing their risk exposure. We are never comfortable with this, particularly now. Always we return to our two key guides:

“establish the level of risk you are comfortable with and stick with it” – move within your level by all means, but not outside it without the most careful consideration.

“timing for a single sum is always difficult, so a gradual move over several months/years is always recommended”  This gradual approach has served many clients very well.

These thoughts will be part of the background to our next round of reviews with clients. If you wish to discuss them or anything else before our next meeting, please call.

Please note, the information provided does not constitute advice. You should contact us to arrange a financial review should you require any further information. 02/07/2010