UK Budgets don’t normally have much of an effect on expats. They give us a bit of an insight into what life is like ‘back home’ and are important for those who have interests in the U.K. such as rental properties. But it does give me an opportunity to raise a couple of points which all British expats should be aware.
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A week ago or so, a good friend of mine and I were discussing our kids’ futures. He was concerned; as he put it: our parents knew that if they worked hard they would do ok, we knew that if we got a good education and worked hard we’d do ok too. But what of our kids? In an increasingly globalised employment market where a university degree is a pre-requisite for unpaid intern jobs what advice can we give them? What subjects will provide them with the best return on the time invested in education? Continue Reading…
Whenever you meet with a financial planner you can expect to be told that you should diversify your investments to reduce risk. But how much diversification should you accept and when does it cease to become a good thing?
First, and from the outset, I am a fan of diversification. It does help reduce risk in all sorts of ways. Whether it is diversification of assets across cash, bonds, property and equities, or across fund managers, investment strategies or currencies – risk is reduced. However, to play devil’s advocate, reduced risk also means reduced potential returns and reduced potential for beating the market.
No one fund will provide you with complete diversification as you will still be subject to the preferences and bias of a fund manager or the company employing the fund manager. The way to reduce this ‘manager’ or ‘house’ risk is to invest in more than one fund. Even funds with the same investment objective can have very different results but you do have to be careful…
If two or more funds are investing in the same areas such as the FTSE-100 or S&P 500 they might often have similar holdings. So by investing in different funds you may not be diversifying your investments by as much as you think and where these funds just track the index returns very similar.
Some funds invest in other funds. These are known as fund of funds. These are super-diversifiers investing in 20 or more underlying funds which are usually accessed on favourable terms. If you have a relatively small amount to invest and you are concerned about diversification, a fund of funds approach may be the answer.
These funds are generally offered in various currencies and are managed within pre-defined risk parameters. Whilst the annual management charges are generally more expensive than buying an individual fund; professional portfolio management, fund research and reduced risk are advantages not provided by individual funds.
So how much diversification is enough? The answer to this question will depend on your thoughts on risk; the amount being invested and what your investment objectives are. An investment professional should discuss these important points with you to ensure that he or she has a good understanding of your needs before making any recommendations.
I hope you found the above useful. If you have any questions please contact me.
The good people at Asteco Property Management have published their quarterly report on property in Dubai and it makes interesting reading. We are now almost a year on from the hype of the 2020 bid and the knock on effect that had on property prices and rents. What has happened and what is expected to happen to prices in the future?
Possibly the biggest subject in the news this week from the UK has been the Scottish referendum on independence. But what would the implications be and would it have any effect on expat living in Dubai?
Last week we looked at what thematic investment is. This week I will show you a cost effective way of managing your portfolio to the theme you have chosen. I have used the example of healthcare but it could easily have been any number of other themes. Continue Reading…