By Annabel Brodie-Smith
The daffodils are out, the birds are singing in the morning, the blossom is on the trees and life is more positive. Spring is on its way. We have a ‘roadmap’ (hate that word) out of lockdown and the boys are going back to school on Monday - hurray! We are not in our new barn home yet, but the builders are in so progress is being made.
Wednesday was Budget day where we heard about the economic consequences of the pandemic and some thoughts on how it was going to be paid for. There was an overwhelming feeling of déjà vu as everything important had been leaked before. But for SIPP (self-invested personal pension) investors the freezing of the lifetime pension allowance, currently £1.073m until 2025/26 was important. Any savings above the lifetime allowance when taken out of a SIPP could land the saver with extra tax charges of 25% if it’s taken as income or a stomping 55% if taken as a lump sum. So Ian Cowie’s article on “growing wealthier slowly” with investment company ISAs couldn’t be more appropriate right now. The ISA limit’s £20,000 a year but there’s no nasty stealth taxes on the way out. Ian holds three of the 28 investment companies which would have made shareholders ISA millionaires at the end of January if you’d invested the full ISA limit from their introduction in 1999 to 2020. Not that we’re suggesting that would be a sensible investment strategy - it’s vital to have a diversified portfolio for the long-term to meet your investment needs. Ian also has plenty to say about the “get rich quick schemes” hitting the headlines “ranging from bitcoins to financial flash mobs causing prices to go up like a rocket before they come down like a stick”. Ian cites the Barclays study starting from 1899 where shares representing the composition of the London Stock Exchange in any five consecutive years did better than cash 76% of the time. He says that’s slightly better than the 75% chance of losing money on Contracts For Difference (CFDs)! Another topic that’s been hitting the headlines is inflation, or more accurately the prospect of higher inflation, as 10-year US treasury rates rise. Markets have been concerned about this and growth stocks have slid. Could this be the time for value investing to shine? A value investment strategy, to remind you, is where a manager buys stocks at a significant discount to their intrinsic value. Our value-orientated managers have plenty to say about the growth-to-value rotation, the impact of COVID-19, inflation and where they are finding opportunities. Find out more from the managers of Temple Bar, Fidelity Special Values, Scottish Investment Trust, Edinburgh Investment Trust and Seneca Global Income and Growth Trust (soon to be renamed Momentum Multi-Asset Value Trust). Another area which could offer value to investors according to analysts at Stifel is private equity investment trusts. Stifel suggested 2020 results could be “remarkably good” considering the backdrop of economic recession and business shutdowns. To find out more about “one of few routes into the exciting and dynamic unquoted companies space for retail investors” read freelancer Hannah Smith’s article.
Finally, with the end of the tax year in sight you might be interested in watching our latest animated video on the right. It explains what venture capital trusts (VCTs) are, what they invest in, the risks and tax breaks on offer. It also has jaunty jazz music and fun animations including fireworks and a flower. So this month I am starting and ending this foreword with flowers. Hope everything’s coming up roses with you.
Annabel Brodie-Smith Communications Director, AIC
