Well, the time had finally arrived.

Daughter Charlotte (nicknamed Chalk) was off to Summer Camp aged 10. This was a Sunday to Friday thing just down the road from us (Rothbury) near Hexham in Northumberland.

The packing was interesting - it seemed to be a list that went on and on involving seventeen pairs of this and a dozen of that - in case it’s wet -they WILL get very dirty - don’t forget walking boots (more expense) and seven pairs of socks etc etc!

A big concern was should she take Teddy. Teddy is much loved, and much battered, so she decided to leave him at home. After discussing with other girls who they were taking, Lucy Bear got the nod. It never ceases to amaze me when she talked to Lucy in a very caring way, explaining where they were going, and then stuffed poor Lucy in an already over packed case!

The weather forecast was quite promising amazingly enough, and Sunday lunchtime we hopped into the car to take Chalk (I give in) to her school where they were all meeting.

Around forty excited year 5 pupils make quite a bit of noise, and as we parked up, Chalk's friends surrounded her - yap yap yap yap. There was Annie (Zebbie), Ellen (Melon) and Bethany (BAT).

They all piled onto the coach, teachers counting heads, are we all here? And off they went. Mother had a tear in her eye, and I have to confess so did I. Chalk seemed happy enough waving like mad through the coach window.

A rule was that they were not supposed to take their mobile phone - Chalk did. So we got a letter from her on Wednesday saying that all was well but the teacher had confiscated her phone!

It was a very strange feeling not having our little daughter around, and we would quite often forget she was away and call out for her or check she was ok before we hit the sack etc. Then on realising she was away you wondered what she was up to.

Well, they were up to lots! Fencing - quad biking - abseiling - tree climbing - archery - movies - disco - and more.

The week did go quickly I must admit, and we enjoyed the luxury of a bit of freedom, but by Friday we were chomping at the bit to see her again. I was working until late on the Friday, and so my wife picked her up at 1-30pm.

When I got back at around 7pm, there she was full of smiles and cuddles for her dad.

She had had a great time, but promised us that she was very homesick at bed time, and is not quite ready to fly the nest yet.

Well that’s a relief - I think!

Q. As a single lady dentist in my early 50s, I pride myself on having achieved financial independence. I plan to slow down at work and finally retire at age 60.

What concerns me are the various opinions on what type of investment I should have within my large pension funds. I have around £400k in total with various companies, and the two advisers I use are adamant that I should stick to a purely equity approach, and not have bonds and cash which are surely safer?

Recently, I personally switched most of the funds over to cash, much to the annoyance of the adviser concerned. He says that over 9 years equities will outperform cash and that I have been very silly!

I had to smile when the markets dived again recently, and I felt I was ahead of the game. But I realise that perhaps I am being over cautious with still quite a few years to go, but I am reluctant to use my existing advisers as they don't appear to really listen to my concerns.

What would you advise?

A. Thank you for the query here. We certainly do not feel that you are being silly. After all, this is your money!

It is clear from the information you provided that your funds, before you switched to cash, were nearly all in equities and property. You have also confirmed that you are not sure what impact these funds could have on your finances when you are aged 60 plus, and that the advisers you have used are tied, meaning that they are not independent.

Our advice tends to be simple in this type of query. We would recommend that you employ a fee based planner who will work for you and not the product provider. Get the planner to build you a cash flow forecast as this will give you a context upon which you can make your decsions.

Once you have a clear idea of where you are now and how the future looks the exact make up of what to invest in will become clear, as you will then know how much risk you need to take (or not) to achieve your goals.

Gilts/Bonds in an investment portfolio are really there to act as a risk reducer, but over time should still give solid returns. As an example, here is a comparison between two portfolios between 1956-2007:

100% equities - Return 12.77% pa - Standard Deviation 19.07%*

50% equities & 50% Gilts - Return 10.74% pa - Standard Deviation 9.54%

As you can see, the returns achieved in the second portfolio were less than the first. However, the volatility was halved! If you do not need to take the extra risk involved in 100% equities - don’t!

We wish you well.

*Data is based on UK Treasury Bills and the FSTE All-Share. The Portfolio Return is an annualised figure. All data kindly provided by Dimensional Fund Advisors. Past performance is not a guide to the future. The value of your investment can fall as well as rise. 

I came across this article today from fellow Financial Planner, Dennis Hall, and thought you'd find it an excellent read in light of the current volatility of the stock market.

Here it is reprinted in full.

Top Ten Tips for Worried Investors

Are you worried about the markets? Thinking of cashing in your chips at the investment casino? It’s been a dreadful year for most investors, and the last few weeks have been particularly dire. It’s easy to say we’ve been through similar periods yet they provide lessons for riding out the current storm.

Here is a reminder of some the bad times we’ve previously experienced

• The last oil crisis leading to a severe bear market during 1972 – 1974,
• then there was Black Monday - 19th October 1987 - when the US Dow Jones market lost one quarter of its value in a single day,
• the Asian currency problems of October 1997 leading to the collapse of Long Term Capital Management, the hedge fund that nearly created global meltdown,
• the collapse of the technology bubble that bottomed out in October 2002.

We’ve put together a list of Ten Tips to help you through this storm.

1. Stay Calm

All of our clients have been through a psychometric risk tolerance questionnaire and the resulting portfolios have been constructed in accordance with the degree of risk that can be withstood, both emotionally and financially. So if you’re one of our clients; stay calm! 

2. Keep your Eye on the Bigger Picture

The big picture doesn’t come to fruition this year or next year. The goals and objectives that we have set are generally further ahead, and investment volatility is already factored into the plans.

3. Market Timing 1

According to Anthony Bolton, (one of the UKs most successful fund managers who ran the Fidelity Special Situations Fund) the overwhelming majority of investors fared poorly compared to the overall returns from his fund. He blamed this on investors becoming spooked and selling out of the fund during bad times, and buying in during good times. Investment success has more to do with “time in the markets” rather than “timing the markets”.

4. Market Timing 2

Remember, markets can recover almost as quickly as they can fall. On the 19 October 1987 the US markets lost one quarter of their value in a just a few hours! The next trading day the Dow Jones index had its fourth largest single day gain (up 4.7%), and within a year it had climbed back to where it was before the slump.

5. Remember Diversification

Not everything will fall at the same time; conversely not everything will rise at the same time. Property and shares are two asset classes that have taken large falls over the past year. On the other hand cash and government bonds, which were perceived as dull, are proving to be the better performing assets in an investment portfolio. Portfolios need a spread of different asset types to help weather the downturns.

6. Rebalancing

Markets that go down eventually rise, and likewise those that go up eventually fall. A diversified portfolio provides some protection against falling values but it is prudent to rebalance the portfolio at regular intervals. This involves taking profits from assets that have risen, and reinvesting into assets that have fallen. There is no hard and fast rule about when to rebalance, the largest US endowment funds rebalance daily whereas for individual portfolios, annually is probably sufficient, so that short term fluctuations are ignored.

7. Make Rational Decisions

Greed and fear are the two devil-emotions of the market - you either control them or they control you. Greed dominates the good times and we hold rising investments longer than we should; whereas fear presides over troubled times. Over time markets revert to their mean rate of return. Simply tracking the market through good times and bad times should provide long term returns consistent with the long term average, in the case of UK equities this is 9.92% per annum (ignoring charges).

“We simply attempt to be fearful when others are greedy and greedy when others are fearful” – Warren Buffet

8. Crystalise Gains, not Losses

Selling near the bottom - or even in a falling market - will simply create a loss. The market is a zero sum game, for every seller there is a buyer, for every winner there will be a loser. I have watched investors for over twenty years and those that have held their nerve and adhered to basic principles have tended to do well. I am in danger of repeating myself, but buy when others are selling, and sell when others are buying, and hold steady when all around you are losing their head.

9. Avoid Noise

Turn off the financial news and stop reading the finance pages, if for no other reason than it’s depressing! TV, radio and newspapers have to fill space every day, and news, commentary and conjecture helps them do it. It matters less to them if they’re wrong, after all tomorrow is another day and they can say something different. Also remember that we’re conditioned to find information that supports our views and beliefs, be careful what you expose yourself to.

10. Don’t Worry in Silence

These are difficult times and you may understandably be feeling nervous. If you are one of our clients and want to talk about it please pick up the phone. Because our service is around coaching and education we support you through difficult times as well as good times, it’s not about selling you the next “hot” investment.

It certainly looks all doom and gloom at the moment doesn't it?

Open any newspaper or tune into the news on TV and if you are anything like me, you get punch drunk with all the articles on how bad the stock market or property market is etc etc.

It may seem perverse then to write an article on savings!

However, as ever, this is an immensely important subject that affects our clients' future security. As we view a Doctor or Dentist’s financial affairs over at least 15/20 years, we can clearly see the effect this has on their overall position.

Quite often the savings and investments they made in the early years were fairly modest, but have now built up very nicely thank you over time. This helps massively towards their 'Financial Independence Day'- the time they can choose to stop working.

Because the service we offer to our clients includes being able to look ahead at how their lives will look in, say, 15 years time (by using cash flow forecasts), we can show how much they need to save/invest NOW so that they do not run out of money in the future.

So, looking at the big picture, are we Brits serious savers?

Well, we certainly used to be. It took some time to recover from the war, but by the mid 1950s, we started to make real progress.

Here is the average UK savings ratio for 1960-1989: #.

60s - 5.65%
70s - 7.95%
80s - 8.65%

The peak came in the difficult winter of 1979, when the savings ratio hit an all-time high of 14.1%, or to put it another way, one in seven pounds.

Now let’s look at how well we saved in the Nineties:

1990 - 1994 - 10%
1995 - 1999 - 8.28%

Yes, we saved hard during the recession of the early Nineties, but our savings habit started to slip when the housing market took off from the mid 90s onwards. However, things have certainly taken a turn for the worse recently, as the final table shows:

The UK average savings ratio, 2000-2008: 

2000 - 2003 - 5.35%
2004 - 2008 - 4.30%

So, a declining trend, and the situation gets even worse.

In the first quarter of this year, the savings ratio collapsed to 1.1%. This is £1 for every £90 earned after tax, and takes us to a 49 year low.

In the past, a squeeze on our disposable incomes would have made us look to cut back and save more. Sadly, after a twelve-year housing and credit boom, it appears that we’ve almost forgotten how to save.

Of course, the purpose of having a bit of a financial cushion was to help when the bad times came. Well, the bad times are here, and for some people it looks like the cushion that has been there in the past is no longer available.

Perhaps the more you earn the more leeway you will have. However it is our experience that the more you earn the more you spend! (It's important to focus on how much income you're left with at the end of the month, not necessarily how large the income is). 

So, ask yourself - are YOU saving enough?

# Savings ratio figures click here

Key Considerations:

It does pay to save. If you are serious about optimising your finances to secure your future, do look at what you can afford to save and invest.

Once this is decided make sure that this money is targeted at fulfilling your goals in life.

ACTION POINT

Ensure you have an up to date expenditure template to identify where your money is spent, and compare this to your income now and in the future by analysing your cash flow forecast (CFF).

This is VITAL.

If you do not have a CFF, ask your adviser to build you one, and if they cannot do this find a planner who can.

Do you have the scope to save/save more? If you have - do it!

It will bring Financial Independence Day nearer!

For more information on holistic planning click here

We've had enough.

Since moving into our new house 14 months ago we decided to bear with the decor until the wedding was out of the way. That in itself was challenging at times as, believe me, you've probably not seen curtains like the ones we've just taken down!

The good news is that it's now full steam ahead.

As I write, the decorator has finished the lounge and dining room and the carpets/flooring has been chosen.

The joiner will be here in a few days to 'revolutionise' the stairs and fit all the new doors.

So in 2 months or so the house should be looking pretty good! Obviously, writing the cheques for everything is painful…

On a separate note, it's all doom and gloom in the media regarding the economy. With the cost of fuel, food and utilities constantly rising, it's all too easy to join in with the negativity.

The way I deal with such news is to simply ignore it on a day to day basis, whilst still being aware of what's going on. After all, all media messages are an interpretation of what the actually facts are. Sometimes this interpretation is accurate, othertimes less so.

Many business people I know, whilst admitting that they've experienced a certain degree of slow down, all agree on one thing. It's at times like this to be more bullish and to work harder to be better prepared when the economy turns upwards again (which it will at some point).

Personally, I've had a close look at all my regular outgoings as when I've done this in the past I've usually been able to make savings without affecting my lifestyle. Examples are cancelling Sky, which I did 7 years ago and I can't say I've missed it, and changing utility provider.

If you have life insurance, it may be worth checking to see if you can 'rebroke' your cover for a lower premium. Even better, check that you actually need the cover. I see some new clients who've been paying for cover for years that they didn't actually need.

Q. I am in the process of purchasing a 25% share in a dental practice. I need to raise £400,000 and have agreed the details of a loan with one of the major lenders.

What else do I need to be aware of and are there any additonal questions I need to ask the lender?

A. You have been offered a number of options, but admittedly you're a little unsure which ones are the best for you.  The lender's variable rate is 1% over the Bank of England base rate, which is very competitive. They have also mentioned a money market rate which currently stands at 5.525% + 1%. Their fixed rate is slightly higher than this, although we don't know the exact figure.

You have also said that you would prefer a loan that will allow you to overpay the debt so that you can repay it earlier. The variable rate option would allow this, with the added benefit that it's the best rate on offer. The other options do not give this flexibility.

It all depends upon your attitude to risk. No one knows which way interest rates will go. The lender HAS said that you could start with a varaible rate and then change to, say, a fix at a future date. Do bear in mind that if interest rates increase the fixed rate deals on offer will probably become more expensive.

If you do go for the fix, check what (if any) redemption penalties there are. They will usually apply for the term of the fixed rate.

Lastly, ask the lender if there is an option to set up the loan on an interest only basis. This will enable you to claim the maximum amount of tax relief on the debt. At the same time, if you have a mortgage on your home it may make sense to reduce that debt prior to the business debt as you don't receive tax relief on residential mortgages. 

We hope this helps!

As from 1st October 2007 the Mental Capacity Act 2005 came into force, affecting a large number of people, their families and advisers. In particular, one of the biggest impacts came with Lasting Powers of Attorney replacing Enduring Powers of Attorney. It is no longer possible to set up an Enduring Power of Attorney, although if you set one up before 1st October this should still be valid provided it was properly executed.

What is a Lasting Power of Attorney?

A Lasting Power of Attorney (LPA) is a legal document that enables you to appoint one or more persons of your choice to handle your financial affairs and property, either now or in the future.

You can also set up a separate LPA which appoints someone to deal with your welfare and personal affairs (i.e. where you live, the care you receive) and even to make decisions about the medical treatment that you receive should you lose your mental capacity. 

Why do you need one ?

Nobody knows what the future holds and situations can arise, such as failing health where you are no longer able to take care of your own affairs. If nothing formal is in place, your assets can go into limbo as no one would be authorised to access them and this can, of course, create difficulties where there are bills to be paid.

Similarly, if you lose your mental capacity, you may wish to nominate somebody to make decisions in relation to your welfare and/or healthcare to ensure your needs are properly looked after.

Who can act as my Attorney?

Anyone who is over 18 years old can be nominated. It needs to be someone you trust implicitly and who will put your needs first. It is quite normal to appoint a trustworthy and responsible member of your family who lives close enough to you to be able to give the necessary assistance. In certain circumstances it can be helpful to appoint solicitors to act as your Attorney, but this and the likely costs of their appointment need to be fully explored before a decision is taken.

Can I have more than one Attorney?

Yes, you can appoint more than one Attorney. If you appoint more than one person to act as your Attorney they can be appointed to act either “together” or “together and independently”.  If they are appointed to act “together”, then this will mean that they all need to act unanimously at all times (for example all signing cheques). If they are appointed to act “together and independently” then any of them can act separately or together. You can even stipulate that your Attorneys must act “together” in relation to certain decisions and “together and independently” in relation
to others.

Can you restrict the powers that you give to your Attorney(s)?

Yes. If you wish, you can restrict their powers to specific acts such as managing your investments, selling your house or simply paying routine domestic bills. Alternatively, if you choose to give them wider powers, the Attorney(s) can do anything which you would have been able to do yourself. You can also include guidance on how they should manage and look after your affairs.

Registration at Court

Your appointed Attorney(s) cannot act upon your behalf until the LPA has been registered at the Office of the Public Guardian (whether or not you are mentally capable). Once registered, your Attorneys are permitted to act upon your behalf should this be desirable or indeed necessary. 

What if you don't make an LPA?

Your family would have to apply to the Court of Protection (which oversees the affairs of people who are not mentally capable of doing so themselves) for the appointment of a Deputy to look after your affairs. This is an inconvenient, long and costly business compared with the ease of thinking
ahead and preparing an LPA now.#

Key Considerations:

Establishing a Lasting Power of Attorney is relatively inexpensive when you look at the alternative of applying to the Court of Protection. Really, it's simply a case of being prepared for what could happen to any of us at any point of our lives.

ACTION POINT

Setting up an LPA is relatively straighforward. Taking action is the key and knowing who to turn to for expert advice on setting one up is crucial. The cost of setting up an LPA is usually between £100 - £200, excluding registration fees. 

If you would like us to refer you to a solicitor, just contact us and we'll give you the details.

# Thanks to Susannah Griffiths of Wall James & Davies solicitors for providing the main content for this article.

I have just returned from a week in Majorca with senior and junior management…

We have been many times, and the end of May is normally a great time to go with good weather duly delivered. Well, as Uncle Bryn says on Gavin & Stacey, 'I won’t lie to you - it was poor!'

But did it stop us having a good time? No, not at all.

We had a trip from Palma on the rickety train, through the mountains with amazing views, to arrive in Soller and finally Port Soller with its lovely bay. The final bit when you get off the train is done by tram, and as they were built in 1929, they are in amazing nick.

We were in an Aparthotel, and one day sitting around the pool in shall we say (at best) cloudy conditions, we heard an announcement saying we had to beware of the power of the sun and make sure we covered up with lots of sun cream. I think my wife is still laughing now!

Luckily there was an indoor pool available as the outdoor one was a bit chilly. Daughter Charlotte, now almost as big as her mother, had a favourite game - push daddy in the pool. This now seems to last most of the day, as apparently it’s hilarious.

The meals we had were varied, ranging from Spanish - Indian - Austrian - Italian. All of it excellent, as the area (Calvia) has become very affluent in the last decade or so.

Near where the hotel is, there is a square with dancing and singing each night. Some nights they have a tribute band on, for example Robbie Williams or Abba. It must be said, some of these are better than others but the location is on our way back from a meal out at around 9pm, and the atmosphere is usually very good with several hundred people enjoying themselves. Also, we often have a final brandy - or two.

One night it was Rod Stewart, and the guy was not just good, but very good.

Another night it was the Bee Gees. Hands up all you 45-55 year olds who used to gyrate to 'Night Fever'!

Now I want to be kind here, so I shall say straight away that some of it was ok. The three guys presented themselves well, and the back up music was ok.

It was when the very tall guy, who to be fair was the only one to 'get right up there', tried to sing 'Tragedy' that it got interesting. You could see him straining to sing the really high notes, and at one point we thought that Orville & Keith Harris were making a comeback!

Ouch it was painful. His face got redder and redder as he strained to get to those ridiculously high notes, and it was with some relief that the song finished. We all gave him a tremendous round of applause with the sheer relief that he had got to the end without passing out.

There was also a new dimension to the holiday, as Charlotte age 10 has suddenly found boys very interesting. 10!

At that age I couldn’t see past a football, but there you go.

Q. We had been considering moving house with our third child now approaching her 1st birthday. We looked at moving to a four bedroom home from our present 3 bed, but due to the turmoil in the housing market, there are not that many quality houses on the market in our area.

It is also debatable whether we can get a buyer for our house, and we hate the uncertainty. The obvious alternative is to extend our home and stay, certainly for the next few years. If we do do some work on the house, then we may not just add a bedroom, but add say another bathroom etc.

In general terms, what adds value to a home best?
  
A. We understand your position, and whilst we are not experts here, this is what we have gleaned through experience and the various articles we read, including this one from the Nationwide #:

First would be a loft conversion that includes an extra bedroom and bathroom. If this were to add, say, 300 sq feet of space, then the value of a typical home would be increased by around 20%.

Second would be adding a bedroom. If it also means gaining space, then circa 10% can be added to the value of your home. If you simply juggle existing space, then closer to 6% may be achieved.

It would then be perhaps central heating (6%) - extra parking (6%) - double garage (14%) - an extra bathroom (5%).

Of course it depends on many factors including location and be careful not to get carried away with the costs of fixtures and fittings! The idea of course is to spend say £15,000 - £25,000, and achieve an increase in the value of your house of say £30,000- £50,000.

Finally, can you find a reliable builder?

Best of luck!

#  This survey was covered in an article you can find here 

There are other similar articles on the Motley Fool site.

When it comes to investing your money, you'll probably know by now that you have numerous options to choose from.

In fact, it can feel like a bit of a minefield and sometimes you may not know if you've made the right choice.

Should you choose a bond fund, equity fund, property fund or a money market cash fund? Or any other type of fund? 

So, what is a Money Market fund?

They are essentially unit trusts that aim to provide investors with an income from risk-free, short-term cash and cash-like holdings.

Some investors have been selling their share funds and have opted for security by pouring millions into these types of funds. In our experience, this type of investor will tend not to have a proper risk assessed portfolio, rather a collection of disparate investments, and may be doing it all themselves.

The money manager of their choice will place this money into bank deposits, certificates of deposit*, very short-term fixed interest securities and floating rate notes**.
 
Most Money Market funds require relatively low minimum investments - typically around £500. They are also quite low-charging, typically with no initial charges and an annual management fee between 0.25% and 0.50%. 

So, in short, these funds are cheap, accessible and low risk.  In these turbulent investment times, what could be better?
 
However, if you are paying an annual fee for a Money Market fund, it would be reasonable to expect that the fund manager would beat the return available from conventional, high street savings accounts. 

Unfortunately, most Money Market funds aren't performing better than traditional savings accounts!

Just take a look at their track record performance:

1 year - 3.8%
5 Year - 15.7%
10 Year - 41.2% #
 
Put simply, leading savings deposit accounts would do similar or better!

So what is going on here?

The problem is that some funds are taking more risk than others, which drags the averages down. Conventional Money Market funds invest in deposit accounts and short-term, high-quality debt.  But, lately, some funds have taken to investing in riskier assets such as lower-grade corporate (company) debt and longer-term loans.

The idea of course is to generate a better return. The downside is that defaults are occurring more frequently and with less liquidity (yet another repercussion of the credit crunch).

As an example, one leading fund has actually produced a negative (-3.9%) return over a year. This is worrying, since these funds are supposed to protect your capital.

So, taking the scope of returns into account, these funds actually seem quite expensive in terms of running charges. What's more, the investment strategy of some funds is hardly low-risk and consequently are all exposed to some degree of market volatility.
 
In addition, it is difficult to determine the quality of the debt instruments your money is being invested in. US Funds have been feeling the impact of the subprime debt crisis for some time now, with falling interest rates putting pressure on returns. So the question is; will it soon be a similar story in the UK?

Since there are a number of market-leading, easy access savings accounts that are paying interest rates of 6 - 6.5% without any market risk at all, then if you are going to invest in a Money Market Fund, on paper it may NOT be the best option for your money.
 
*  Certificates of deposit = A time deposit (i.e. a deposit with a specified maturity) made at a bank which pays fixed or floating rates of interest. The lender receives a certificate that a deposit has been made which can then be sold in the secondary market whenever cash is needed.
** Floating Rate Notes = Bonds and other debt instruments that carry a variable (i.e. floating) rate of interest, usually linked to a reference rate such as the LIBOR.
#  Source: Investment Management Association, IMA. March 2008.

Key Considerations:

We have written many articles on the folly of 'jumping ship' and having no clear investment philosophy.

It really can't be stressed enough - be an investor, not a gambler.

ACTION POINT

If you have a Money Market Fund, review this urgently. Contact your planner or adviser, and ensure you are getting the most from your investments.