How will the new USA president affect the way you invest?
Your investment strategy needs to change with the times
The election in USA of Donald Trump has resulted in a boost to share prices, especially in America. But there is less certainty over the value of income producing investments, such as bonds. This is because if, Mr Trump's policies go as planned it could bring a return to inflation and higher interest rates, these investments could lose value.
What if I have a lump sum to invest?
Since Brexit we've seen a sharp fall in annuity rates. An Annuity is where investors swap a lump sum for a lifelong income paid by an insurer. It would take a strong rise in investment returns for annuity rates to become more attractive.
Donald Trump is an unknown quantity, with no political track record. This could be an additional risk factor in your portfolio.
If you're worried about your exposure to volatility, cut back your risky assets like stocks and high-yield corporate bonds to levels where the downside risks are more manageable.
It's more important now than ever to seek sound financial advice.
Our investment and inheritance tax advisers are based in Peterborough. If you have a lump sum to invest or need advice with your investment strategy, please give us a call.
Bonds are issued by governments and companies, they pay a fixed return. Because their payout is fixed, bonds become less valuable when the returns on other assets rise or are expected to rise.
Bonds will remain a significant component for many who need income and cannot afford to risk their capital.
Interest rates have been at low levels for some time and the uncertainty caused by Trump's presidential win could lead to an extension of that low-rate period.
However, other factors could push bond yields up or down. Trump's plans to boost infrastructure spending and cut taxes could increase government borrowing. If that leads to the issuance of more government bonds, it could cause bond yields to rise.
Bonds could stay low due to uncertainty or could rise due to additional government bonds resulting from increased spending and tax cuts.
UK equity income funds
Dividends from companies are another source of income. Some funds specialise in shares that combine a dividend with expected capital growth over time.
While several fund managers said they had been steering clear of US equities ahead of the US election, most have not. Investors should look carefully at which shares the funds are holding.
UK equity income funds can pay a slightly higher income than global income funds.
Global income funds
Global funds can provide some protection against volatility by helping to spread the risk across different countries and companies.
Global funds offer protection against volatility
Many investment trusts pay an attractive regular dividend. Now could be a good time to buy as some quality trusts are now trading at "discounts" to asset value. This means some trust funds are trading below the value of the assets held in them.
It could be a good time to look at investment trusts
The rental market can be a good source of income for retirees, though it is not without risk.
When the buy-to-let tax changes come fully take effect in April 2017, tax relief will eventually be a flat rate of 20 per cent. Landlords who pay basic rate tax would see no change, but those on higher incomes will find themselves losing much more in mortgage interest payments.
Watch out for the new buy-to-let mortgage changes
A balanced investment portfolio
With an uncertain market, it is important now more than ever to have a balanced portfolio and spread the risk of your investments.
Come and talk to one of our advisers in Peterborough about your portfolio. We can advise you on investment strategies.
Investment adviser Peterborough
You may be looking to invest, buy a financial product or plan for the longer term, whether or not you need financial advice will depend on a number of factors such as what product you are looking for, how complicated your finances and personal circumstances are and your short and long-term goals.
We can offer you an introductory face-to-face consultation for free, why not give us a call?
Inheritance Tax adviser Peterborough
Inheritance tax can cost you dearly in the event of your death, If you think your estate might have to pay Inheritance Tax, now would be a good time to get advice.
Don't lose out from your Estate, make sure you have everything in place to minimise your tax bill
Henson Crisp are based in Peterborough, specialising in Investment Portfolios, Lump Sum investments, Inheritance Tax Advisers and Charity Investment Advice.