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Personal Finance Investment timing and sectors

Joe Coten ponders, from his other home in the Gironde, on the effects of the global financial crisis which is now impacting us all and the decisions on investment necessary to keep us afloat in these turbulent times


t is hard to write about matters financial without mentioning the American debt debacle, which looks set to shower us with a deal of unpleasantness imminently. Even more the case with the euro according to George Soros, who knows a thing or two about such matters, where its survival is hanging on a knife-edge. I will resist the temptation however, sitting here looking out at my garden in the Gironde, the latest swirl of economic turmoil that has swept us along since 2008 and which can viewed as a the scariest roller-coaster in the theme park seems a world away. As with the global financial system not all is idyllic here though, with an Atlantic storm delivering much huff and puff that makes keeping the swimming pool free of debris a Sisyphean task.

If this sounds a bit blasé, apologies are due. I did write a while ago that it would take a fair number of years for the mess caused by the bankers and their debt crisis to be sorted out. Having put a 5 year timescale on the recovery date in 2009 I now think it will be 2020 before we clearly see any evidence of the yearned for recovery. So what tips can I offer in these depressing times to deal with the general calamity assailing us? Not many sadly. Apart from firstly saying, it’s now more important than ever that you should review your investment and pension portfolio. It is very possible your holdings don’t reflect the amount of investment risk with which you feel comfortable. Get someone whose opinion you value to take a look under the bonnet of your investment vehicles for you. People continue to tell me that they are just waiting for markets to settle down before making any investment. What happens of course when markets settle and even take on a rosier hue is that prices shoot up very quickly. If you go away for a week’s holiday and miss

the upward surge you will pay far more for an investment afterwards than if you buy when everyone is spooked by the market. The problem remains that you can never know when exactly the best time is. Leaving money in cash is a sure way of losing its value, with interest rates stuck in a trough and inflation picking up speed. Since we can’t know exactly when over the coming years the economy will improve, if you can take a medium term view and can accept a certain level of volatility for your investment, a good place would be in high-yielding FTSE stocks. Take a look at the companies that pay out healthy dividends whatever the financial weather and take the plunge accordingly. A good alternative if that seems a bit like hard work is to go for a fund manager with a solid track record over 5 years. Then just let them get on with it.

And now a potentially interesting tax-saving idea that unfortunately will be totally useless for Barbican flat- owners. If the lease had permitted you could have considered letting out your flat for 3 weeks when the Olympics are on next year. Of course you may be staying in town and actually going to the events if you’ve been lucky enough to get tickets, (which increases the numbers of those for whom this paragraph is academic.) Leaving the provisos to one side you could hypothetically have moved out and let your flat for 3 weeks, charged a rent of up to £4,250 and it would have been tax-free under the HMRC rent-a-room allowance rules. So long as you are the owner of the property in question and it is your main or only residence, the income would have been tax-free. Perhaps you have a friend or family member who can benefit from this tax- planning idea.

Being a proud Englishman I can’t resist too long writing about the weather…even if the weather in


question is that of the Gironde. After months of drought July has seen nothing but rain leaving the local wine-growers crying into their vintage. If there is an Indian summer this may bode well for the vins liquoureux such as Sauternes just up the road from here, assuming the grapes haven’t rotted in the rain several months too soon.

On the subject of vines, I managed to enlarge my French vocabulary earlier this week. At the local convenience store I asked for a baguette as daily ritual dictates but was gently instructed that the type of loaf I was nodding at is in fact called a sarmentine and not a baguette at all. Apart from being a sourdough loaf with a discreet sprinkling of sesame seeds, a sarmentine distinguishes itself from a standard baguette by having at each end a V shape, not unlike the shape of a catapult. The reference however is not military but viticultural and is meant to represent a vinestock with a branch coming off it. How much more amusing it is to think of it as a legacy from the Hundred Years War…..or perhaps it can be seen as a reaction to the latest invasion taking place up the road in Dordogneshire. It looks like we’re winning this time by the way, no matter that the French knights always win at the re-enactment every summer at Castillon-la-Bataille. In my opinion it’s a fix and more wishful thinking than cricket.

Barbican resident Joe Coten

is a member of the Personal Finance Society.

He may be reached on 0207 588 9626.

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