If you can keep your head when all those around you are losing theirs…

It has been quite a year for stock markets. In the past 12 months, shares have soared to record highs; higher than the tech boom and the credit bubble of 2008.

But let’s not get carried away. Being disciplined with an investment strategy is as important when times are good as when times are bad – in some ways, the excitement of a rising market makes it harder to do. Here are three things that investors should remember while they are enjoying a rising market – and what we do about each one.

  • Maintain the right balance of investments.

Every investor should have a carefully considered mix of assets, with the appropriate proportions of (and within) cash, bonds, shares, property and so on. However, as the value of each asset class rises and falls at different rates, these proportions drift. Maintaining the intended balance is important, because your allocation of assets is one of the bedrocks of the strategy that will help you reach your goals. So, we rebalance our investment portfolios regularly, by trimming the things that have performed well and adding to the things that have lagged. This might seem counter-intuitive, but it helps to keep your investment portfolio in the best shape to achieve your long-term goals.

  • Avoid getting swept along with the market.


When the market is rising, it is easy to be tempted into taking more risk to increase your returns. The pain and uncertainty of a falling market can quickly be forgotten when shares are on an unbroken year-long rally, as they have been. But, sticking to your guns and remembering your original goals and strategy are essential. Chopping and changing your approach when the market shifts can detract from returns rather than enhance them. Our investment philosophy is not influenced by the cyclical nature of the market; it evolves over time as the science of investing evolves.

  • Guard your gains.


When money is tight, people tend to watch their expenses more closely than when they are feeling flush. In the same way, some investors can neglect to monitor their fees and transaction costs when markets are rising. Letting expenses slip is like trying to fill a bath with the plug out. This is why we keep portfolio expenses low in good and bad markets.

Sometimes, the key to successful investing is simply to remain disciplined; to remember to stick to your well-considered decisions; and to keep your head when all around you appear to be losing theirs. It’s as important to remember this simple philosophy when markets are rising, as it is when they are falling.

Enough is enough, is enough

What is enough?

This is a question we are often asked by both new and existing clients; we have to say, it entirely depends on what ‘enough’ means for them.

It is an incredibly personal thing as it will mean different things to different people, based upon their personal values and lifestyle.

This could be any of the following:

  • Being able to continue your lifestyle (minus the mortgage and school fees) when you stop work.
  • The freedom to stop work and do the things you dreamt of doing.
  • A lump sum to buy a boat and sail around the Mediterranean, buy a holiday home, or go travelling in style….
  • Helping children through university, or getting on the housing ladder.
  • Leaving a legacy to your family or favoured charity.

There are, of course, many more personal definitions of ‘enough’ and one person’s definition is not necessarily yours. It’s also not surprising to find that many people have never thought about it until asked.

We spend a lot of time at Carpenter Rees getting to know our clients and asking the questions that help to define what it looks like to them. As financial planners, we will tell them if they need to make compromises and take tough decisions in order to secure enough for the future. Our job is to develop a long term plan and manage it year on year, to help them ensure that they reach their idea of ‘enough’. That is what makes our job, and your interaction with us as your advisers, interesting.

In addition, we have some clients who have more than they need and that can lead to some very interesting discussions too.

So, what is your ‘enough’? Let us help you get there and if you have more, then let us plan to use the surpluses in an interesting and meaningful way.

If you, or someone you know, might benefit from a discussion about their ‘enough’ please feel free to pass on our details.




Freedom, Freedom, Pension Freedom and Dinosaurs

The first line of the classic Wham song Freedom: ‘Every day I hear a different story…’

It seems to me, and no doubt to you, that those lyrics ring true when we read about the new pension freedom legislation that comes into force on 6th April 2015.  We’ve all seen press coverage about people going out and blowing their pension funds on cars and holidays, and I’ve even read an article about someone deciding to withdraw their entire fund and invest it in dinosaurs for their museum – classic coverage from one of the heavyweights.

Where there’s a Will there’s a way

We would always advocate making a Will, regardless of your situation, as you then have complete reassurance that your wealth will be divided up as you wish, whether it be amongst relatives, friends, charities or political parties.  If you do not have a valid Will, then the laws of intestacy apply – these rules differ depending upon where in the UK you live, and the following relates specifically to England and Wales.

What’s the point of a pension?

The point of a pension is to provide you with an income when you stop earning a salary. Traditional pension schemes were designed around this idea, guaranteeing to pay members a defined benefit when they retire.

This means that if you ask a teacher what their pension is worth, their answer will be related to their future income. But things have changed and, these days, most people are being enrolled into scheme where the amount that goes in is fixed and what comes out is at the mercy of investment markets, interest rates and inflation.

Planes, Automobiles, Risk and Exposure

I read something in the New York Times recently which included this sketch by Carl Richards, a financial planner in Park City Utah who also works as The Sketch Guy in the Your Money section of the paper. I have taken the main message from the article to apply to the UK rather than the US.

Risk Exposure

I had a conversation with some clients last week who love to travel. When I asked them where they were planning to travel this year, they surprised me by saying they didn’t know. When I asked why, they replied ‘it seems to be a little bit scary to travel based on everything that is going on in the world’.

In my opinion, this perfectly demonstrates how newspaper headlines tempt us in to thinking the world is falling apart.

We begin to think that because there were a few planes that crashed last year, air travel is suddenly riskier. However, whilst the media depicted the most dangerous ever year for flyers, according to Flightglobal’s Annual Review, 2014 was the safest year for air travel yet.

In comparison, even though the risk of dying in a traffic accident is many, many times more likely than a plane crash, people don’t think twice about getting into cars. The headlines confuse issues such as these so much, so that it effects the decisions we make.

This year, we’ve already lost track this year of the number of people asking whether the events in Russia and the Ukraine, the rest of Europe, or China should have an impact on their investment strategy.

Let us be clear – investing is not a risk free proposition. Risk is something that we have little control over; making it something that is rarely worth our time and attention.

Exposure is easier to define and we can rest assured knowing that if an event was to happen, we have a reasonable idea as to what impact it would have upon our financial affairs.

So, while risk poses the question, ‘what could happen?’, exposure asks, ‘what impact will it have on me?’ We can’t always answer the first question, but we can have a good idea of how to answer the second.

This is why we talk about asset allocation in clients’ portfolios, as opposed to whether Russia will invade a neighbouring country!

It means that we set up life assurance cover – instead of worrying about catching Ebola – and it also means that we wear our seatbelts, even on a short drive to the shops.

Risk will always grab the headlines, but by understanding and evaluating our exposure, we can gain valuable control over our lives.

“Image credited to Carl Richards at Behavior Gap”

Building your business through a Family Pension Fund

Along with the general upturn in the economy, we are seeing an increase in the number of clients upgrading their premises – either by way of extending, refurbishing, or in the main purchasing new premises altogether.

Many of these clients are utilising their pension funds to purchase new property as an asset of their pension fund, or alternatively borrowing money from their pension fund to help fund the purchase/improvement. Like me, they would much rather pay rental or loan interest to their own pension fund, rather than to a landlord or bank.


A recent article in the US suggested that eight out of 10 Americans look online in the first instance for answers to health and medical problems.  With the growth of smartphones and free apps (such as the plethora available free from the NHS on Appstore) this is a trend that’s likely to get stronger.

Unfortunately, technological advancements have led to a new medical condition that practitioners now have to deal with – ‘Cyberchondria’.

Collins English Dictionary defines Cyberchondria as: ‘[the] unfounded anxiety concerning the state of one’s health brought on by visiting health and medical websites’.

When I finished reading the article, apart from an overwhelming urge to delete all of my health-related apps so I could live a happier healthier life, I started to think about other things we do and look at online that could cause us anxiety.

Probably the most common of these is related to finances.  Websites like moneyfacts.co.uk, comparethemarket.co.uk and moneyadviceservice.org.uk, deliver huge amounts of information about how we can make our money work harder, grow faster and spread further.

On top of that, there are a large number of online products available that enable us to invest, manage our money and plan our financial affairs.  We certainly do not lack choice.

However, as with health, this could lead to self-diagnose that our finances are in a very poor state, or worse urging us to review and re-review information until we are so overloaded that we cannot make a correct decision.

The treatment for this financial-based ‘Cyberchondria’ is remarkably similar to the health-based condition – speak to your professional advisers.

We deal with this information every day, and can help you navigate the financial turmoil to arrive at a plan that helps your financial security.

The Invisible Gorilla

Sometimes we focus so hard on something we think is important, we become oblivious to significant events right under our noses.

This is the idea behind The Invisible Gorilla, a book based on a series of experiments by Christopher Chabris and Daniel Simons.

The centrepiece of their work is a short film in which two teams of three people pass a basketball between them. Viewers are instructed to count the number of times the team in white passes the ball. About half the people who watch the film are concentrating so hard on the white team, they fail to notice a person in a gorilla suit enter the scene, stop to beat their chest in the middle of the screen, then stroll casually out of shot.

The New Pensions Landscape – Making Pensions Interesting.

I don’t know about you, but I don’t usually find either George Osborne or pensions that interesting! However, I can honestly say that the Chancellor has managed to change my view on both of these points.

There have been some seismic changes in pensions legislation and policy over the years, believe you me! Despite this, the Government has always stuck firmly to two mantras –  ‘we don’t trust you to do the right thing with your pension fund when you retire’; and ‘pensions are there to maintain your standard of living in retirement and not as a vehicle to pass down wealth’.