With Andrew Gilmore, Chartered Financial Planner
Life has changed dramatically for us all in the last two months or so. Whilst minor amendments are being made to restrictions, it does seem like we will be living with much more distance for a long time to come. Many yearn for a return to “normal” but a return to exactly the way we were without a fully effective vaccine being: found, mass produced and administered to billions seems unlikely. So what should we be thinking about when making big financial decisions in an uncertain world? Here are three to name a few.
How readily accessible are your savings and investments?
Prices of many investments can be quite subjective and ultimately depend on a willing buyer being ready with the cash when you are. In times of crisis, if you urgently need to sell your investment, what are the chances of that coinciding with a time of crisis for your potential buyer? For example, a property is lovely but you can’t eat a brick if the tenant can’t pay their rent. It is important that you understand how accessible your investments are and match that to when you need your money available.
What effect will all the monetary stimulus have?
The government and Bank of England have introduced extraordinary measures to combat the economic hit of Covid-19. Partly through more government borrowing and partly through billions of pounds of more quantitative easing – in layman’s terms, printing money. This has helped prevent the financial system from freezing up and becoming disorderly – allowing businesses and households to keep going despite a drop in income.
Some feel that with interest rates so low that this is all great news. Some worry that it will ultimately cause inflation and life will cost more in future as companies have to raise prices to reflect a more expensive world. However, inflation failed to meaningfully pick up with quantitative easing after the financial crisis, and there are strong factors preventing it from doing so again. Either way, the monetary stimulus has had and will have a profound effect on the value of investments
What businesses will be successful in the new world?
Quite simply: the ones that can adapt. Think about a restaurant switching to takeaway, a print newspaper going online, a drugs manufacturer switching to vaccine production, a tech company bringing out a video conferencing app. The current predictions from the Bank of England are for the UK economy to be smaller in 2020 than it was in 2019. Whilst that will be because some businesses go to the wall, that still means billions of consumer pounds being spent in 2020, but just in a different way. Researching the winners will be key.
All in all, this dramatic and largely unpredicted wholesale change of how we live our lives and spend our money means that the decades old rules of how to protect and grow your savings are having to change rapidly. It has never been more important to seek professional financial advice.
The value of your investments can go down as well as up and you may get back less than you originally invested.
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