Ten Ways to Grow Your Money
The following article outline's our 10 golden rules on how to grow and look after your money.
Rule 1 is to stop hidden trail commissions on your pensions and investments. Many of you won't realise, but the way lots of financial advisers, banks and insurance companies work, is they take a hit trail or hidden fee commission on a regular basis from your investments. This can be anything from a 0.25% per annum to 0.5% to 1% per annum. That money is paying them a fee to look after your money. So my suggestion is, where possible, explore exactly what those are and look at getting them stopped because that 0.5% or 1% a year, each year will get your money to grow quicker.
Rule 2 is to make sure you use all of your yearly tax allowances. Personally, I’ve got over 20 of them, so feel free to contact me to view a list of them, as this article does not list them in detail. As a rule, make sure you use your capital gains tax allowance, pension allowance and your ISA allowances. Money is better in your own pocket than it is in the Treasury’s pocket where you will have paid too much tax, so make sure you use all your tax efficient allowances.
Rule 3, is active fund management. We have all heard it before: “buy low sell high”. This is what professional investors do, so this is what you’ve got to do with your investments. When you see headlines like: “stock market has hit an all-time high today” - that’s the right time to lock in profits. You may see those headlines and consider waiting to see if it rises any further, but they most likely won’t, so it’s best to act as soon as possible. In a similar way, when you see: “stock market has crashed today, world markets crash, China crashes, American crashes” - that’s the time to invest your money. As a summary, be more active when it comes to switching your investments in to stock market funds, out of stock-market funds, into property funds, into bond funds etc.
Rule 4 is never allow commissions to be paid on any of your pensions, investments, life insurance policies, sickness insurance policies, travel insurance etc. Pay a fee, because those commissions will be coming out of your pensions or investments. The rules have changed to which the word ‘commission’ can’t be used any more, but many investment companies, insurance companies, banks and financial advisers still take a percentage of your investment or your pensions. You need to be aware of this and always pay a fee for those services.
Rule 5, is only ever look for the lowest charged pensions or investment policies. This may sound self-explanatory but always look for the best value and always look for the cheaper option. You will be staggered at the differences in investment charges on your pensions or investments between company A and company B. Always compare and if you don’t compare, get your financial adviser to compare which leads me on to rule number six.
What sort of financial adviser should you use?
My guidance here is only ever speak to highly qualified advisers who are chartered financial planners or certified financial planners. These are people that have got the equivalent of solicitor or chartered accountant qualifications in financial planning. They are likely to be much more professional and therefore, give you a more transparent fee agreement, rather than taking high fees and hidden trail commissions from your policies.
Rule 7, is in correspondence to drip feed going back to markets again. What should you do in these volatile market times? When it's a falling market, look at drip feeding your money into those investments and in turn look at regular premium savings plans. If you save regularly into your pension or you drip feed money into investments, look at falling investment markets for where you’re paying regularly, which takes me onto rule number eight.
Rule 8, is concerning lump sum investments. Always look for markets that are rising, so the aim is to buy at the bottom of the market, therefore if the market has crashed, that’s the time to invest lump sums into that particular area because it will grow and in turn so will your lump sum. So rules seven and eight, for markets that are falling invest regular premiums that you buy lots of cheap units as the markets are falling, and in rising markets [rule 8] you need to invest at the start and it will grow.
Rule 9, is another simple one: compare. Always compare and look at consolidation. So, when you’ve got lots of pensions that you might have taken out over the years with different employers and different companies or pensions that you paid into yourself a few years ago, those charges may have been higher a few years ago compared what you can get today. Always compare charges on old policies to newer type policies and even look at or get your adviser to look at whether you should consolidate your pensions or investments because lots of investment companies and pension companies give you a discount on the charges if you consolidate and have a slightly bigger pension fund or slightly bigger investment. So, comparing and consolidating may save you many hundreds, if not thousands of pounds over the coming years.
Finally, rule 10 is in conjunction with the first law of management, ‘something that is not managed or reviewed regularly will deteriorate’. It’s the same if you're not checking your car or your electricity, or your gas boiler or whatever it might be, sooner or later it will break. So never forget the first law of management which is: ‘things that are not managed deteriorate and things that are measured and monitored will improve’ and apply it to your investments. Monitor and manage them as you would with other aspects of your life and they will grow.