Thursday 26 May 2011

The Taxman Gets More Than You Think! (UK)

Nobody likes paying tax, although we all know that a lot of it goes towards essential goods and services (a lot but not all...). We all need to pay our share - but I'm not sure I want to pay more than I have to!

However, I hadn't really thought about how much tax our earning (and spending) results in - the answer is quite amazing really.

Tuesday 24 May 2011

DIY Investing and Affluent Investors

The DIY Income Investor approach is based on, well, 'DIY investing'.

The good news is that a recent survey in the US shows that over two-fifths of affluent investors also use the DIY approach. In other words, although they could well afford to use advisors or fund managers, they choose to Do It Themselves.

Monday 23 May 2011

Portfolio Buy: Standard Chartered Perpetual Corporate Bond ESC6 8.103%

As I described in a previous post, I was looking for a new high-yield investment to reinvest some of the income I have received from dividend and corporate bond coupon payments.

As the sum to invest was not huge (a couple of thousand pounds), the options were:
  • government bond (perpetual): yield 4.9%
  • corporate bond (perpetual): yield 6.9%+ 
  • high-yield shares: 6%+
  • ETFs: yields 4.4% (corporate bonds - non-financial); 4.5% (HYP)

Patience and the Art of Income Investing

Patience is a virtue, they say. Anyway, I'm pretty sure that without patience you cannot be a good investor.

A recent article in Scotland on Sunday has highlighted the importance of patience for savvy consumers. It reported - encouragingly - that, according to a poll commissioned by Standard Life, only one in eight of us would choose the instant gratification of a £640 holiday this year, rather than wait five years for a holiday worth £5,000.

Experiments with young children show that we learn to be patient at about 3 to 4 years old. This is the age when, for example, a child can be presented with the following deal: "here's a cookie; if you can wait 5 minutes without eating it, I'll give you two cookies!"

So we all learn the basic principle pretty early on: sometimes it is better not to take a reward straightaway but rather to delay receiving the reward and hopefully let it grow: delayed but amplified gratification.

Friday 20 May 2011

Portfolio Rejuvenation Through Income Investment

One of the benefits of running an income-based portfolio as promoted in the DIY Income Investor approach is that it requires regular re-investment. This comes about because of the cash interest, share dividends and bond coupons, as well as new money for investment coming up through the levels of the Income Pyramid. I reckon these 'refreshing' new purchases amount to 15-20% of our investment portfolio each year.

This flow of cash requiring allocation means that a long-term plan is required, with practical investment rules to help to answer the question - now what?

Monday 16 May 2011

Portfolio Buy: BM Savings 'Easy Access' eSaver Account 2.75%

As I discussed in a recent post, I was looking for a new high-interest but 'easy access' bank account as part of my Level 2 savings (on the DIY Income Investor Income Pyramid). This supplements our current accounts, which are used for day-to-day spending.

Keeping an 'emergency fund' available to deal with unexpected large expenditure items is good planning - but I want to make sure that the money is working hard and generating as much income as possible. This account allows me to accumulate cash to hopefully move in due course up to the next level of the Income Pyramid  (Level 3) - a high-yield deposit account with an even higher rate of interest.

Saturday 14 May 2011

Portfolio Buy: BM Savings 5-year 5.05% Fixed-Rate Bond

As part of the management of my fixed-rate savings I have some cash to re-invest, as one of my 'easy access' account deals came to an end and has accumulated a fair amount of cash that no longer needs to be 'easy assess'.

So, I am going to move this cash up to Level 3 of the DIY Income Investor Income Pyramid (i.e. from Level 2 'easy access') - managing a chunk of cash that is not needed for day-to-day use or as an Emergency Fund. Inevitably, it is necessary to 'roll over' these cash accounts as they come to the end of their term.

Where to Stash some Cash? (UK)

Investing cash for a fixed period in return for a high return is Level 3 of the DIY Income Investor Income Pyramid.  However, in the UK it's getting harder to decide where to put your money.

Friday 6 May 2011

Portfolio Buy: Cable & Wireless Worldwide (CW)

The lastest portfolio purchase is a high yield dividend share - Level 6 on the DIY Income Investor Income Pyramid.

As I described in a recent post, I was looking for a new purchase for a SiPP - one that has a good yield, can be purchased in relatively small lots in the SiPP and is low risk.

Wednesday 4 May 2011

The Next Investment for the SiPP (UK)

Most people know that the government will give you back tax if you save in a pension. I described in a previous post how even  non-workers can recover tax (even if they haven't paid any income tax recently). So, not only can a non-working spouse hold the couple's savings - and pay no tax on the interest (up to their personal allowance) - but they can also pay into a pension, although the amount is limited. As I noted before, this results in an instant 25% return.

I now need to decide how to invest this 'grossed-up' amount...