Insights | Financial News & Trends | Leeburn Financial Planning

5 November 2024

Presidents change, markets remain

Another four years have flown by, and here we are again, on the morning of the 60th U.S. presidential election. The U.S. president is often considered one of the world’s most powerful figures, wielding substantial influence over the world’s largest economy and one of its most formidable militaries, albeit limited by a system of checks and balances through Congress. Perhaps it is understandable that the media, politicians, celebrities and business owners alike wish to make their voice heard during campaign season… it is noisy time of year!

15 October 2024

The Golden Illusion

By its very nature, the investing industry is full of differing views on how one ought to invest their hard-earned cash. One of the more polarising debates is whether an investment in gold makes good sense. The debate tends to flare up each time gold experiences a rapid growth in value, such as in the last couple of years.

1 October 2024

The importance of rebalancing

Rebalancing is the practice of realigning the components of a portfolio of investments back to a target allocation from which it has drifted away. Naturally, the process is contrarian and results in selling the things that have done well and buying more of what has done less well. To some, this may feel painful, but it is good practice and sensible behaviour your adviser can certainly support you with.

10 September 2024

Investing is simple, but not easy

It is a simple statement that the decision to invest in the first place provides an opportunity to protect hard earned savings from inflation, and perhaps grow further. It is not easy, however, to have the foresight, as well as the discipline to deny oneself spending today for the opportunity of a better tomorrow. It is also not easy to work out how much one might want, need and be able to invest in stock markets to help fund future spending goals. Getting this right is key and where good financial advisers can add value. It is simple that stock markets act as a core driver of returns in an investor’s portfolio, and that a good place to start for stocks is the structure of the global markets, which defines the basic country, sector and company weights and offers broad diversification. It is also simple that high quality bonds act as protection from economic turmoil and help to smooth returns. It is, however, not easy to know what evidence to look for in order to gain an understanding about what types of long-term investments typically improve a portfolio’s structure. This comes with the need to build an understanding of the risks one wants to be exposed to through time. It is also not easy to decide which bonds are deemed to be defensive enough in nature to be considered an insurance policy against the uncertainty inherent in stock markets. Finally, it is a simple concept that a low-cost fund structured to capture the target strategy gives investors a better chance of achieving their investing goals relative to a high-cost one. It is, however, not easy to regularly screen for which funds might be best positioned to capture the returns of each part of the market, or to understand the trade-off between the management costs of a fund and the opportunity cost (i.e. what could have been) of omitting an investment. It is harder still to implement a thorough and regular investment oversight process, which is required to maintain confidence in the approach.

9 September 2024

Talk yourself out of the market portfolio

A straightforward way for an investor to partake in capital markets is to own a diversified basket of stocks of companies from around the world, which can be achieved by owning a global equity fund. Perhaps a global market index tracker. These days, this can be done cheaply and with ease. Consider this quote from Eugene Fama, often called the father of modern finance: 'You have to talk yourself out of the market portfolio

6 June 2024

Politics and portfolios

It feels like 2024 is the year of the election with over 64 happening in various countries around the world covering around 50% of the world’s population ! These range from the farcical pretence of the re-election of Putin, to that in the UK. At this time, it looks like a probable victory for the Labour party over the incumbent Conservatives, seemingly with a large majority. In the previous election in 2019, British politics was polarised between Boris Johnson’s ‘getting Brexit done’ mantra and a very left-wing alternative of Jeremy Corbyn and his ‘magic money tree’. Today, the two main parties are vying for far more central ground that tends to win elections. Who said democracy does not work?

28 May 2024

Inflation is a tax on your wealth

The general public are all too aware of the challenge of inflation when they get to the supermarket checkout, or when paying their energy bills. Inflation does not only affect the spending power of their income today, but also the real value of their assets (e.g. investment portfolio assets) that will deliver future spending power, perhaps in retirement. While most people understand the nature of this hidden tax, it may surprise many just how big the impact of the inflation head wind has been over the past few years.

16 May 2024

The Investment Committee - paddling hard beneath the surface

Meeting your financial goals, so that you and your loved ones are free to live the lives you aspire to, requires high quality, ongoing financial planning and the construction and maintenance of a robust well-diversified, long-term investment strategy. It is the firm’s Investment Committee that is responsible for the ongoing governance of the latter.

26 April 2024

How much is enough of a good thing?

Most of us can think back to our childhoods and remember a time when we ate too much ice-cream, or raw cake mix, that turned the moment from feeling wonderful to feeling sick. In the investment world, the invention of the index fund (i.e. a fund that closely tracks a defined market index), was a moment when investors were handed a big bowl of index-flavoured ice-cream. It is amusing to know that some in the US even declared index funds as ‘un-American’ as they were not trying to beat the market!

2 February 2024

Cryptocurrency - too big to ignore

In light of the US regulator’s (SEC) recent approval of several Bitcoin spot ETF’s, there has once again been a lot of talk around cryptocurrency and the exposure of client portfolios to this particularly volatile asset class. On the 10th of January 2024 the Securities and Exchange Commission (SEC) approved the first ETFs that would directly hold, and track, the price of a bitcoin[1] which is arguably the best known cryptocurrency. Prior to this, Bitcoin ETFs were listed on US markets, but these did not hold bitcoins directly, holding derivatives (futures) of the cryptocurrency, or investing in the shares of firms that were involved in the technology. The argument from those who wished to list direct holding ETFs was that the use of derivatives made the pricing mechanisms more complex and the products more expensive. Now that several of these direct holding products have been approved, providers hope that costs will come down, their value will go up and liquidity will increase due to an increase in daily trading through ETFs.

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