Getting your financial house in order – MoneyTalk Episode 11

Updated : Sep 15, 2019 in Articles

Getting your financial house in order – MoneyTalk Episode 11


Welcome to Money Talk,
making good investing easy. This episode is all about getting
your financial house in order. Short term savings to long term investments.
We’ll be looking at opening up about our finances ditching the gender myth and learning when to bring our pensions
together and when not to. We’ll be talking to two fidelity experts Paras Anand, on active investing after the digital revolution. And Ayesha Akbar, about the importance
of diversification. First up we all love to chat but not when it
comes to money. Some things are easy to talk about. Which actor is James Bond to you? Oh Sean Connery all the way, that accent. Pierce Brosnan the Irishman. It has to be Roger Moore. Who is your greatest Wimbledon champion? John McEnroe definitely. It’s got to be Serena. Andre Agassi. What was the first single you bought? Oh Sade ‘Your Love is King’, on vinyl.
Showing my age. Mr Oizo, ‘Flat Beats’ from the Levi’s advert. A huge Madonna fan so ‘True Blue’. What are your financial goals? Some things aren’t. Sometimes talking to others can help make
things a little easier. I’m 28 so my big goal at the minute is that
elusive deposit on my first home. It seems so far away but i’m using a
stocks and shares ISA to try and get there, to try and get
me a little bit of growth. What about you Jo?
Well i’m 43 say my focus at the moment really to make up for those motherhood years. When I had my children I took time out to be
at home work part time so the contributions were not quite as they
should be that’s my focus at the moment but I’ve also embarked on my first ISA which
is actually really not for me it’s for my daughter for the first car. And what about you Janet? Well I’m 53 and my goal is to retire at 60. So at the moment I’m concentrating on my
workplace pension extra contributions, matched contributions
from the company, free money. But I still think I may go down the stocks
and shares ISA route as well Dan. It’s amazing we’ve all got these different
goals and sometimes you feel that no one else can understand what you were
saving for. But the products are the same. We’ve always talked about ISAs and pensions. it just seems like we’re all using them. I guess it’s just using them in different
ways, balancing in them what’s right for you. At your time balancing you know getting
enough into your pension and then using your other ISAs to achieve your sort of shorter
term goals if you like. If you like I’m looking to retire at 60,
7 years in a stocks and shares ISA is going to give me a much better return than
sitting in my online account. So I’m definitely going to go down that
route Dan, definitely. Excellent. Love It It really is good to talk, but no one likes
being told what to do. As women and girls we
know all about this. The trick is knowing what to pay attention
to and what to ignore. Little girls dream big. And that’s exactly what every little girl
should do. Become the world’s best… whatever. Cue the checklist. Marry Prince Charming and have the wedding
of your dreams. Get on the property ladder
and the career ladder and climb as high as you can. Don’t forget to have a baby. Tick tock.
There goes your biological clock. And then you grow up.
Prince Charming turns out to be a frog. The country pile ends up a lot smaller. Your career ladder has a few unexpected
twists and turns. By the time we’re in our 20s we’re
most likely over the fact that we didn’t have a pony as a child. Okay with the fact that becoming a real life
princess is not going to happen and secretly relieved that we don’t
yet have the husband four kids two dogs a cat and a hamster. Can you be superwoman? Of course you can but be your own version. Who wants to be a cartoon cut out anyway. This is a checklist for every little
girl who’s ever dreamed big and for every big girl wants to live her
dreams wherever life takes you. Invest in an ISA.
Don’t forget your pension. Harness the power of compounding. Don’t get into debt. Stop dreaming and start living the life
you want. Today! And to do that you have to be
financially secure. One way to achieve this is to take control
of your finances by bringing together all of your pensions. Ed Monk takes a look at the pros and cons. You’ll always feel better once those
everyday jobs are out of the way. Our finances are no exception. A little bit of time and efforts can make
things cleaner and more manageable in the long run. On average we each have 11 different
employers throughout our lives. That means that the pension pots we collect
along the way can be a very mixed bag. Bringing all your defined contribution
pensions together in one place can make them more manageable. Giving you a single summary
of how much you’ve saved where your money is invested so you can see a clearer
retirement outlook. But there are some times when it doesn’t pay
to consolidate. Sometimes it’s better to keep your pension
pots separate. If the annual charge your paying is less than wherever you’re thinking of
consolidating to, it will cost you less to leave your money where it is. There may be exit charges if you move
the pension or valuable benefits of an old scheme that you might not want to give up. For those with large retirement savings it
can be useful to have access to smaller pension pots to help your financial planning. If you decide to consolidate you can do it
inside a self invested personal pension or SIPP. Or perhaps inside your current
workplace pension scheme where the charge might be slightly lower. Or maybe you’re happy to keep things separate
after all. But you won’t know what’s best
unless you check. Either way you’ll feel better once it’s done. Now you’ve relaxed about talking money
you’ve got your finances in order. Next up is deciding how and where to invest.
And a key decision for all investors is whether to try and beat the market with
an active approach or to just track the market with a passive fund. So Maike went to speak with Fidelity’s Paras
Anand about active and passive investing and also about the impact that technology is
having on this debate. Technology has transformed our world, with
a single tap or swipe you can pay your bill, book a room or a ride home. Technology can even read your mind. It can take you places, you never thought
you’d go. Technology is my life simply easier and
cheaper and investing seems to be no exception. Paras, one of the biggest investment debates
of our time is active investing vs passive investing. And in this debate technology has also
played a role. Yes so interestingly both strategies active
investing and passive investing have been around for a long time I mean passive
investing has been with us since the 1950s 1960s but where technology has really played
a part has been in lowering the cost of passive management. Things like electronic trading, market making
price transparency that’s led to this enormous rise in the number of passive
strategies and index funds. So active investors really are stock pickers
and fund managers but the attraction of passive investing is that it is cheap and
advocates of this type of investing say why buy an active manager a few of them tend to
outperform the market? What did you say to this? When we look at sort of the performance of
active managers one of the ways in which they really deliver value to their clients
is actually in preserving capital during moments of weak market. So I think that’s one of the things that
I do think for investors it is worth paying up for. We are the second longest running bull
market since World War 2 and that environment really has benefited passive
investors but there’s no guarantee that this will continue indefinitely. I think I think you’re absolutely right
because effectively you know you get exposure to the market index which is sort
of rising. The facts are that you’re paying a lower
price means that there’s no sort of tradeoff between that and I think absolutely that’s
one of the things that’s led to this rise in passive investing. But I think one of the most interesting
things to note about this is that the more passive investors there are in the market
the less efficient the market becomes it becomes less efficient because a greater
number of people don’t care about the value of what they’re buying. So actually not only do we see at the point
where the cycle changes you know the risk of there being more volatility in the market
but actually increases the opportunity for active managers in the next cycle. Because active managers can tap into those
market inefficiencies. Absolutely the whole premise of active
management relies on identifying individual inefficiencies and benefiting from those. So if the market in general is becoming less
efficient, hence you get more opportunities for active managers. There’s little doubt that technology has
made passive investing easier and cheaper. But the rise of passive investing has also
created opportunities for the discerning active investor. When technology lets you down you do need the human touch. Now Tom, we’re talking active investing
and I know a key thing behind Fidelity Select 50 list of favorite finds is picking
the best fund managers. That’s right and even when you’ve picked
the right manager you still need to mix them together into an effective portfolio. Tom went to speak to Ayesha Ackbar about how
she does this in the new Fidelity Select 50 balanced fund. There’s only one thing worse than lack of
choice and that’s too much of it. We’ve all been the child in the sweetshop we
want it all but have to choose. It’s not so very different when we come to
pick our investments. At Fidelity we offer more than 2000 funds
from over 100 managers. It can be hard to know where to start. 100 grams of the apple and custard. 200
of the aniseed balls and one of these please. When you suffer from the tyranny of choice, it’s good to know there’s someone who can
make up their mind. Ayesha Ackbar is the manager of
the Fidelity Select 50 balanced fund. Ayesha how do you go about picking and mixing
the managers for the fund? It’s a good analogy pick n mix Tom, because
that’s essentially what we’re doing. The first stage is picking the managers and
that’s the job of our manager research team. 12 analysts who’s day job it is to scour
the entire investment universe looking for the managers that they think will
outperform over a longer term and all of this research boils down into a high
conviction list of active managers covering asset classes such as global equities fixed
income and alternatives. Okay so once the managers have been picked
for the select 50 list. It’s your job to mix them. Exactly, so mixing them providing different
asset classes exposures. So on average the balance fund will have
half of its exposure and equities and risky assets and the other half in more defensive
assets such as fixed income and cash. Okay so how do you go about mixing those
strategies to create the fund? So the mix of asset classes really depends
on two things. Firstly I have to think about how markets
are going to behave in the shorter and medium term so I can increase the exposure to
equities for example if I think the prospects for stock markets are good
over the shorter term. And the second thing I have to think about
is how to combine the managers together and this is not just about picking managers
that are going to outperform because it’s involving understanding how managers are
going to react in different market environments and blending them together to
make sure we have good balanced exposure to the markets they represent. So we’ve picked the managers we’ve mixed
the asset classes we put it all together in one neat package. We all like the idea of lots of choice, but
sometimes it’s much simpler just to leave it to the experts Hopefully this episode of MoneyTalk has got
you thinking about how to make the most of your money.
And don’t forget you can get guidance on savings retirement and investment from me and my team on all Fidelity’s digital
channels. Sweet? Thanks for watching. Goodbye.

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