New tax year, new investment allocations?

We have now moved into the new tax year 2014/2015 and many clients have already arranged to use up their full ISA allowance of £11,880 with the plan to increase this to the increased maximum of £15,000 from July 2014. Some refer to the investment opportunity presented by this increase in the ISA allowance, along with greater investment flexibility, as the New ISA (NISA). The changes are welcome and some prefer the flexibility of ISAs to save for their retirement, either by using stocks and shares options or cash ISAs or a combination of both, now being able to switch between the two options to suit their needs and attitude to investment risk.

Having recently met with a Bank of England representative, we anticipate the Bank of England base rate (currently 0.5%) to start to rise from around the beginning of 2015.

In past blogs, Chapters Financial has detailed its views on investment allocations and our current preferences. We regularly review our 'house' views on investment areas and classes, maintaining a quarterly Investment Committee to give continuity to our process and client recommendations. You may want to look at our Investment Risk Scale to consider your individual attitude to investment risk.

Current views are as follows:

Positive Allocations
UK Equity Income
UK Equity
US Equity Income
US Equity
Commercial Property  

Neutral Allocations 
In a change to previous blogs, we continue to watch Europe as an investment area, although are currently not actively recommending this area.*

Corporate Bonds  

Negative Allocations
BRICs ( Brazil, Russia, India, China)
* Europe ( see notes above)

Other investment areas are available and will be considered to meet our client requirements.

Past performance is not a guarantee of future performance and changing fund/ asset allocations does not guarantee an increase in performance.

No individual advice has been provided during the course of this blog. If you would like financial advice on the allocation of your funds/ investment strategy, then please contact the Chapters Financial team in Woking (01483 330800) or Guildford (01483 578800).  

Keith Churchouse BA Hons FPFS 
Director, Chapters Financial Limited 
Chartered Financial Planner 
Certified Financial Planner 
ISO22222 Personal Financial Planner 

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

Changing Market Conditions & Corporate Bonds

In this modern age of information, it is easy to become ambivalent of the ever growing numbers of financial headlines and articles that skip across your computer and iPod every day. As an example, we have all lived and breathed the recession and financial crisis’s that have affected the very core of our financial understanding and acumen over the last 5 years. It is this last point that made me stop and think. The BBC headlined ‘Reflecting on the credit crunch five years on’ on the 09th August 2012, confirming the start of the Credit Crunch on the same day in summer 2007 and some were advising that ‘a correction in the markets was expected, not “a total meltdown”’.
Was this a correct statement to make? Looking back over what has been a highly turbulent economic period, and reading some of the headlines from the media, you would think it was wrong. However, to challenge this, I would ask the following question:
Is the world and its economic areas/opportunities better or worse for this 5 year crisis/recession?
I think the answer is neither. It is just different.
Most individual investment areas have seen significant changes in fortune over the last 5 years. Examples could range from deposit/cash fund returns seeing now increasing returns against a backdrop of falling Bank of England Base Rates. The Commercial Property sector seeing a negative (and very rapid) capital value correction at the end of 2008 and recently, questions in the press over the continued liquidity in the Corporate Bond market.
Looking at the Corporate Bond market further, I am not overly concerned about increased liquidity problems in the corporate bond market. That is because I am conscious that liquidity comes and goes – it is a feature of the capital markets and it is especially a feature of the corporate bond market – and I factor these roving liquidity conditions into my expectations.
Of course there are debt instruments that are associated with high levels of liquidity, even in the very worst of financial markets. Those are the sovereign bonds of the major nations, including gilts. If you’ve reduced your exposure heavily here in favour of corporate bonds then, in these circumstances, I would have some concerns. I must stress though, I am not forecasting any imminent problems with the corporate bond market in isolation.
When reviewing an individual’s asset allocation of their investments and pensions, it is important to understand that Investors should hold risky assets only in the proportions that they would be comfortable to hold for the duration of a significant downturn. We can help you understand this process to allow you to invest to a risk level that suits you. Clients should not be holding risky assets in the hope that they’re not going to be risky while they hold them. If the aggregated risk and return characteristics of an investor’s portfolio are suitable for the individual investor, then Corporate Bonds could continue to remain a suitable investment vehicle.
Past performance is not a guarantee of future performance
At Chapters Financial, we have been successfully offering a fee-based model for over 5 years now and plan to continue to offer high quality independent financial advice into the future for both our existing clients and our new enquirers. Because each consumer is different, as is their financial planning needs, no individual advice has been provided in this Blog.
Keith G Churchouse, Chartered Financial Planner
Director, Chapters Financial Limited

Chapters Financial Limited is Authorised and Regulated by the Financial Services Authority. Number 402899