Published on Jan 18, 2016
When stock markets take a dip, long-term investors shouldn’t lose heart. This week I revisit three of the key building blocks of successful saving.
0:11this week three simple suggestions for savers where the star 2016 let’s think
0:18about ways we can boost the amount that we say so what are we fighting for a
0:23quick reminder very quick we all saving basically over three pages of people TV
0:26is about official yes it’s really important that you structure your saving
0:31and investing according to when you might need the money back so over the
0:35short term holidays treats yes yes yes but more importantly we do need that
0:40rainy day fund six months of salary let’s say that aside for emergencies
0:44active gold people living in the north of England all about land at the moment
0:48and or redundancy and or illness that’s important but that’s not by name in
0:54general store at the start of the story
0:56what about the medium to hanging by the house deposit I gonna pay for that
0:59wedding what do you all for your children’s
1:02gonna pay for that new car just use a card example of a big asset you might
1:07need to pay for goods and capital together to do that and then there’s no
1:10longer not to be forgotten as the state cut back the cost of children’s
1:16education retirement and long-term care and the costs of these rising all the
1:26time
1:26fairly frightening right so saving without thinking about three periods now
1:31in one video let’s just take three messages my three suggestions in this
1:35video don’t feel too much cash markets may be volatile nonetheless be careful
1:40how much of your wealth cash number to reinvest dividend income now I’m not
1:47suggesting that the only two assets you can invest in cash and equities you
1:52might be thinking that just give me a few points here there are government
1:56IOU’s yes they can be useful in the short to medium term and this property
2:00but I gotta be honest you know the videos I deal with my that as an asset
2:04class I would say best days behind at the time being and George Osborne is
2:09making it more and more difficult to make money so that’s leave that to the
2:13professionals in the retail experts say
2:16and focus on ways to maximize the returns from equities and one way of
2:22doing that is to use up till 2015 2016 I surrounds well thats not hand over more
2:28than we need to tax man and if you combine these two together you get a
2:33potentially quite powerful combination in terms of building your medium to
2:38long-term pot now briefly what’s wrong with cash
2:43the International Monetary Fund know that s not famous beginning it big
2:48economic predictions right in my view but nonetheless influential says cash is
2:52a convenient medium of exchange yet the stuff you wanna get done now and in the
2:58future
2:59sure getting transactions done is a useful union accounts we’re keeping
3:02score it’s a way of pricing different items in one unit you like but is it a
3:09store of value in the short term perhaps in the long term we were certainly not
3:15as a message of put out before they come out of my sight of an angle overalls
3:19requestion have been thrown by a few people think and you keep going on about
3:23purchasing power
3:24the fact that cash doesn’t maintain your personal foul what do you mean hopefully
3:28this will sell it goes beyond offshore imagine you had one pound in 1985 or
3:38that by well roughly put it this way
3:41roughly three loads of sliced bread now with me my you one question mark the
3:48date from its very reliable source government statistics but there’s the
3:52point that found has lost load unload approaching Powell why the calls the
3:58price the slides Lopez gone up and therefore inflation is done its work in
4:02terms of eroding what that power by looks like the same pound your pocket 95
4:07take a pocket now playing pound buys less that’s what I mean by erosion of
4:13your purchasing power parity specular freaky like 35 PHD’s call it in 1985
4:20not so much now ok diesel per litre diesel that’s what you need
4:261695 one-pound 49 hours yet .
4:30pound is not even buying a litre where’s it bought several of them in 1985 now
4:35carry his own detached house 45,000 joined rebounds than two hundred and
4:40seventy three thousand pounds now we do you believe in the idea of trying to own
4:45your own home there are emotional and financial tax advantages to doing so but
4:50look at the way that has moved and got appointed lawyer something close to my
4:55heart
4:5573 be there in three pounds 35 now and in my local quite a bit more than that
5:01this is the point one pound would by 95 is very different
5:08by now when you hear me talk about ocean of purchasing power sheila Grant
5:13expression that’s what I’m getting at
5:14ok we’ll see this another way by using you had under pounds and you were
5:20looking at a twenty five-year period and you were looking at three different
5:24rates of inflation because you don’t know what inflation gonna be inflation
5:27is the right which goods and services like carrot bread are changing in price
5:31but you know what you don’t get a future but imagine that a hundred pounds being
5:37eroded over 25 years at 2% inflation 5% 10% or so what kind of sluggish right UK
5:45long-term average for the save the past 50 years roughly speaking and what would
5:52that look like over 25 years just a two-percent inflation right people to
5:56percent so much is it just a two-percent inflation rate reduces a hundred pounds
6:00two more like sixty pounds of 5% shreds it much much further and 10% down to a
6:11very very small amount in purchasing power so that’s the kind of damage
6:16inflation could do you think he will the moment I’m not much inflation and we saw
6:20who worrying well just bear in mind that is true we are hovering around zero
6:25the moment that’s unusual the UK is touring the past is no guide future but
6:31nonetheless we’ve seen much much higher rates inflation and there are plenty of
6:36economist speculating that sooner or later we may see it return so we thought
6:42that is number one number two why reinvesting comes as a senior allocating
6:46a portion of your money to shares not cash one way you can seriously dent the
6:52return you get from equities and it does do it and people are shocked by is to
6:56keep spending the income now discerned
6:58you may need to draw for income in retirement for example been the main
7:03make sure you reinvested give you one example
7:07100 the power of dividends now let’s again compared 935 to now let’s compare
7:13the Footsie 100 index capital only 100 total return of capital and reinvested
7:21dividends how’s it look alright while these numbers won’t mean much these are
7:26the levels of the index then now ok but the numbers are put up next we’ll me
7:31will make it more obvious point and make it so the index has risen about 1412
7:376205 on capitol only basis between those points on a total return basis from 356
7:45up to 497 lots of numbers what one might wanna say what is the point that a four
7:52and a half times increase on capitol only basis compared to a fourteen times
7:57increase on a total return basis and thought you 100 is by no means the most
8:02impressive example of reinvested into work but it is the pussy 250 that gap
8:08will be massive about it for you all share the point to make here is that
8:13reinvested dividends have a powerful effect on your overall total return
8:17worth remembering that why bother with a nicer I’ll be returning to this topic in
8:24more detail
8:24nearing the end of personal financial year which ends on April
8:29but for now why shelter investments then I said well first of all they’re getting
8:34better and better and better the government seems to like them
8:37keeps changing them in your favor the annual Lions keeps rising
8:42person a little over 15,000 pounds you can switch your investments around in
8:48cash and shares for example and you can allocate them in any proportion you on
8:52the annual total each tax year
8:55withdrawals are allowed any time zone like say thank you to think more
9:00carefully about when you need the money back with ice as you can in theory take
9:04it out at any time if you do you lose the ability to then take future taxpayer
9:10this on the same capitol there’s complete flexibility about how you
9:15allocate your money within the ice and these days a spouse can even inherit
9:19attacks advanced use which is any indication relatively recently now
9:25couple about the fact that you can put more and more things inside a nicer
9:28point are returned to the flexibility is looking pretty good in terms of I said
9:33power just give you a quick reminder if you were to able to put a thousand
9:39pounds monthly into a nice way would you be after 15 years at the FCI is
9:46considered sort of low rate of growth of meddling rate of growth and a high rate
9:51of growth no way to guarantee by the way of just for illustrative well you have
9:55paid in thousand pounds a month okay times 12 give you a year times fifteen
10:01hundred and eighty thousand pounds in all three cases but if you were to
10:06achieve tax-free growth before charges admittedly but tax-free growth of 2% 5%
10:118% how much would you add on top for effectively doing very little they also
10:17raised a week in the cases two percent growth a decent chunk 5 percent and a
10:23substantial chunk if you manage to get growth and no one knows for sure which
10:27of those growth rates that achieve point is the white stuff is more or less for
10:34free as a free lunch
10:36markets but compounding tax-free growth adds substantially to the value of your
10:41account taking it
10:42210,000 on the left 266 in the middle and three hundred and forty on the right
10:49off the base of a hundred nature and now you like to know more
10:55point I just made and some other tips to carry through 2016 please do you have a
11:01thing about getting a copy of my shorts and actual business guides won’t be over
11:05thirties won the over fifties wandering way to get your FREE copy it’s the usual
11:10place editor collect dot com
