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Investments

Managing Stress and Anxiety With Your Investments

Managing Stress and Anxiety With Your Investments

“The key to winning is poise under stress” – Paul Brown

3 min read
Reduce Stress and Anxiety in Investing

Managing Stress and Anxiety With Your Investments

“The key to winning is poise under stress” – Paul Brown

3 min read

Investing can be a rollercoaster which is frightening for many, and it is not uncommon for market fluctuations to cause stress and anxiety.

However, understanding the nature of investing can help manage these feelings to ensure your investments cause as little stress and anxiety as possible.

This article will give you the key things you need to know to maximise the enjoyment of your investing journey.

Why Can Investing Be Stressful?

Simply put, investing involves risk and uncertainty, which can be scary.
 
The fear of losing money can lead to stress and anxiety, and watching market volatility and constantly monitoring your portfolio can amplify these feelings.
 
The pressure to make the right investment decisions adds to the stress, as does the overwhelming amount of financial information available.
 
It is also possible to come across people claiming to have an ‘easy investing secret’ to make sure your money ‘only goes in one direction’ (up!) and remove the complexity issue, which can just add to the stress. Have these people really come across a secret that nobody else knows and can solve all your investing problems? The short answer is, no.
 
There are no secrets in the investing world (or at least, very few…) that could have significant impacts on your portfolio. This means that, were such easy tricks to exist, everyone would already be doing it!

The Cyclical Nature of Markets

Markets are inherently cyclical. They go through periods of growth (bull markets) and decline (bear markets). 

If you wake up one day and see your portfolio has dropped by 1%, 3%, or 5%, but then increased by 1%, 3%, or 5% the next day (or higher / lower), do not worry. Behaviour such as this is normal.

Understanding that these cycles are normal and inevitable can help reduce stress.

Over Time Markets Have Gone Up

The good news is that, historically speaking, markets have trended upwards over the longer-term.

Naturally, past performance is not indicative of future returns, but it can be re-assuring for short-term anxiety and stress.

Remember, investing is a marathon, not a sprint.

Avoid Always Checking Your Portfolio

Constantly checking your investments can lead to unnecessary stress. Short-term market fluctuations can be misleading and may prompt impulsive decisions. 

It is easy to become worried if your investments fall for one continuous week (or more), but if your time horizon is in another few years (which it hopefully is!), take time to breathe and relax.

Instead of constantly checking your investment value, set periodic reviews of your portfolio. This approach allows you to stay informed without becoming overwhelmed by daily market movements.

Accept That Your Investments Can Go Down

If you are involved in investing, you will hopefully have been told that your investments can go down.

Accepting that investments can lose value is critical. Markets will have ups and downs, and no investment is risk-free.

By understanding this, you can better prepare mentally for potential losses.

Up, Down, Left, Right, In What Direction Are Your Investments Going?

Investing can be stressful, but understanding market cycles and adopting a long-term perspective is key to managing stress and anxiety from your investments.

In addition, having a trusted Patterson Mills Financial Planner to help you navigate your investment journey can provide much needed peace of mind, especially in periods of low (or even negative) growth.

Get in touch with us today and book your initial, no-cost and no-obligation meeting. There has never been a better time to secure your financial future with Patterson Mills.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Financial Planning

How To Build a Strong Investment Portfolio in 2024

How To Build a Strong Investment Portfolio in 2024

“Always keep your portfolio and your risk at your own individual comfortable sleeping point” – Mario Gabelli
 
3 min read
Annuity - Annuities - Should You Have One?

How To Build a Strong Investment Portfolio in 2024

“Always keep your portfolio and your risk at your own individual comfortable sleeping point” – Mario Gabelli
 
3 min read

Building a strong investment portfolio is essential for achieving your financial goals and ensuring you have the best possible chance to attain long-term wealth. 

With 2024 having brought it’s own challenges and opportunities so far, it’s crucial to stay updated with the best practices. 

So, today we are giving you our top 10 tips to building a robust investment portfolio.

1. Avoid Market Timing

Trying to time the market can be risky and often leads to suboptimal returns. Sure, you might get lucky, but sticking to a disciplined investment approach and avoiding making drastic changes based on market ‘noise’ is typically a sound strategy.

2. Assess Your Risk Tolerance

Before investing, take time to understand your risk tolerance. There is not a one-size-fits-all solution when it comes to investing, as opting for a 100% equity index might work for your friends or people in online forums, but not be suitable for you. Investing is a personal exercise, and your decisions should be based on your profile and yours alone. Your risk tolerance is often calculated based on factors such as age, financial goals, and investment horizon.

3. Maintain a Long-Term Perspective

Investing is a long-term game. Avoid making impulsive decisions based on short-term market fluctuations or the latest news headlines. Stay focused on your long-term financial goals.

4. Diversify Your Investments

Diversification is key to managing risk. Spread your investments across different asset classes such as stocks, bonds, real estate, and commodities. This strategy helps mitigate losses in one area with gains in another.

5. Understand Tax Implications

Be aware of the tax implications of your investments. Utilise tax-efficient investment accounts, such as occupational or private pensions, to maximise your after-tax returns. Proper tax planning and taking advantage of tax-efficient strategies can enhance your investment performance.

6. Consider Global Exposure

You don’t have to limit your investments to your home country. Global exposure allows you to benefit from growth in different economies from around the world. Investing in international stocks and funds can also help with diversifying your portfolio further. Remember, there are increased risks with global exposure that, whilst not inherently an issue, it is important to make yourself aware.

7. Focus on Quality Assets

If you are looking to pick specific companies, invest in high-quality assets with strong fundamentals. Look for companies with solid balance sheets, consistent earnings growth, and competitive advantages.

8. Stay Informed

We mention this a lot, but financial education and literacy is paramount to successful financial planning. Make sure you stay up-to-date with market trends, economic news and what is going on in the world. Being informed helps you make better investment decisions.

9. Rebalance Your Portfolio

Rebalancing your portfolio involves ensuring your desired allocation is maintained on an ongoing basis. Sometimes, you may find a well-performing asset becomes a more significant percentage of your portfolio than you would like. Hence, rebalancing ensures that your portfolio remains aligned with your risk tolerance and investment objectives.

10. Regularly Review Your Goals

Life changes occur quite frequently! Things like career shifts, children, or unexpected events can impact your investment strategy and your financial goals. Therefore, it may be more important to regularly review and update your financial goals than you might think. After you have done so, you could need to adjust your portfolio to reflect these changes and stay on track to meet your objectives.

Laying A Strong Foundation

Building a strong investment portfolio will usually require more than just the above list, though now you know the basics, you can work towards financial success with ease.

For bonus tip number 11, the best thing you can do to build a strong investment portfolio in 2024 is actually to get in touch with us today and book your initial, no-cost and no-obligation meeting. Our experienced Advisers will ensure you tick off all the above-mentioned points and more.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Investments

The Pros and Cons of Real Estate Investing

The Pros and Cons of Real Estate Investing

“Now, one thing I tell everyone is learn about real estate” ― Armstrong Williams
 
3 min read
Pros and Cons of Real Estate Investing

The Pros and Cons of Real Estate Investing

“Now, one thing I tell everyone is learn about real estate” ― Armstrong Williams

3 min read

Real estate investing is a popular strategy for building wealth that involves purchasing, owning, and managing properties with the expectation of generating income or value appreciation over time.

Like any investment, it is not guaranteed to increase in value, and also has it’s own set of advantages and disadvantages.

Read below to find out what they are so you can make more informed decisions as to whether real estate investing is right for you.

Pros of Real Estate Investing:

Let’s get straight into it.

Here are some of the advantages to real estate investing:

  1. Potential for High Returns: One of the primary attractions is its potential for high returns. Historically, real estate has shown steady appreciation in value over the long term, which in turn has provided significant capital gains. There is also the possibility to receive rental income from investment properties which can generate ongoing cash flow, thus further enhancing returns.

  2. Compounding Returns with Leverage: The ability to borrow a significant percentage of an investment property’s purchase price can greatly increase total returns. For example, borrowing 75% with a real estate mortgage, secured on both the property and the rental income, would result in a 100% return on your invested capital after just a 25% increase in the property’s value (before applicable taxes).

  3. Portfolio Diversification: Being separate from stocks and bonds, your investment portfolio can enhance its diversification with real estate. This is because real estate values often move independently of other assets, thereby helping to reduce overall portfolio risk and volatility.

  4. Tax Advantages: Real estate investors often benefit from various tax incentives and deductions that can lower their overall tax liability. Expenses such as mortgage interest (excluding the UK), property taxes and insurance can often be deducted from rental income, reducing taxable income. Additionally, profits from the sale of investment properties may qualify for preferential capital gains tax treatment (excluding the UK), depending on the holding period or rules in your relevant jurisdiction.

  5. Tangible Asset: Unlike stocks or bonds, which represent ownership or debt in a company, real estate is a tangible asset that you can see, touch, and control. Owning physical properties can provide a sense of security and control that can be appealing to those seeking more direct involvement in their investments. Along the same vein, real estate investments can offer the opportunity for hands-on management and improvement, allowing you to add value and increase returns.

Cons of Real Estate Investing:

We’re not here to waste time, here are the disadvantages!

  1. Lack of Liquidity: One of the major drawbacks of real estate investing is its lack of liquidity compared to other asset classes. Unlike stocks or bonds, which can be bought and sold quickly, selling a property can be a time-consuming process that may take weeks, months, or even longer. Illiquidity can make it challenging for those wishing to access their capital quickly in times of need or take advantage of new investment opportunities.

  2. High Upfront Costs: Real estate investments typically require a significant amount of capital upfront, including down payments, closing costs, and ongoing maintenance expenses. For many, this high barrier to entry can make real estate investing inaccessible or impractical. Financing real estate investments with mortgages can also introduce additional risks, such as interest rate fluctuations and leverage.

  3. Risks From Leverage: Whilst borrowing to invest in property is often seen as a positive way of increasing returns, interest rate risks need to be managed carefully. The risk of interest costs exceeding rental income over time can be very real, especially during periods of rapidly rising interest rates. In such circumstances, exiting the investment may not be possible (see point 1 above) and so maintaining good cash reserves is vitally important.

  4. Management and Maintenance: Owning and managing investment properties can be time-consuming and labour-intensive, requiring landlords to deal with tenant issues, property maintenance, and regulatory compliance. While hiring property management companies can alleviate some of these responsibilities, it comes with additional costs that can eat into overall returns. As well as this, vacancies, property damage, and unexpected repairs can negatively impact cash flow and profitability. Maybe not very ‘passive’ income after all..!

  5. Market Risk: Real estate markets are subject to fluctuations and cycles, which can impact property values and rental demand. Economic downturns, changes in interest rates, and shifts in local market conditions can all affect the performance of real estate investments. You must carefully assess market risk and conduct thorough due diligence before committing capital to real estate to ensure you are making informed investment decisions.

Buy In or Steer Clear?

There are ways to invest in real estate without having to buy a property, such as through REITs, which can help with upfront and management costs, though the majority of the pros and cons remain the same.

It’s important to carefully weigh up these pros and cons when deciding whether real estate investing is right for you. How does it align with your overall financial goals, time horizon, risk tolerance and more?

Patterson Mills are here to help you answer these very questions (and more!) when it comes to considering real estate within your investment portfolio.

Get in touch with us today and book your initial, no-cost and no-obligation meeting.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Investments

Currency Hedging: The Cost of Managing Risk

Currency Hedging: The Cost of Managing Risk

“Between calculated risk and reckless decision-making lies the dividing line between profit and loss” ― Charles Duhigg
 
4 min read
Currency Hedging

Currency Hedging: The Cost of Managing Risk

“Between calculated risk and reckless decision-making lies the dividing line between profit and loss” ― Charles Duhigg

 

4 min read

Businesses and investors are increasingly exposed to risks stemming from fluctuations in foreign exchange rates. Currency movements can impact the value of investments, affect profitability, and introduce uncertainty into international transactions.

However, there is a way to mitigate your exposure to currency risk, and this is through a strategy known as ‘hedging’.

For you, the investor, hedging is simple as it involves simply buying a fund that has ‘hedged’ in the name or fund literature.

Under the bonnet, currency hedging involves a range of financial instruments designed to mitigate the potential adverse effects of currency fluctuations on your investment portfolios, business revenues, and cashflows.

This article aims to help you make informed decisions about whether currency hedging is the right strategy for your investments, or not. So, read below to find out more!

What is Currency Hedging?

Currency hedging is a risk management strategy used to mitigate the impact of currency fluctuations on international investments or transactions. 

It involves taking positions in the foreign exchange (FOREX) market to offset potential losses that can come from changes in exchange rates.

Currency hedging aims to protect against adverse movements in currency values that could erode the value of investments denominated in foreign currencies.

One common method of currency hedging is through the use of financial derivatives such as forward contracts, futures contracts, options, and swaps.

Essentially, by hedging a certain currency, you are taking a position on the future direction of that currency’s movements. This is akin to placing a bet on whether a particular currency will appreciate or depreciate. So, you are locking in a specific exchange rate to protect yourself from adverse currency movements.

These instruments allow you to lock in exchange rates at predetermined levels, providing certainty about future cash flows and reducing the uncertainty associated with currency risk. However, whilst currency hedging can help smooth out your returns and protect against losses in currency fluctuations, it also comes with costs and complexities that you need to consider carefully.

Is Currency Hedging Good or Bad?

The effectiveness of currency hedging depends on various factors, including your specific circumstances, market conditions, and investment objectives.

As mentioned, you are placing a bet on whether a particular currency will appreciate or depreciate, locking in a specific exchange rate, and you do not get to do this for free!

Just like any insurance policy, currency hedging requires paying a premium, typically in the form of management fees or transaction costs. These costs can then eat into your potential profits and diminish your returns (which is especially true if the currency movements do not move in your favour).

In some cases, currency hedging can provide valuable protection against currency risk, particularly for those with significant exposure to foreign markets or those holding international assets. You can even potentially enhance risk-adjusted returns over the long term whilst enjoying reduced volatility in your portfolio.

However, do not be fooled, hedging does not eliminate currency risk entirely and may not always be effective in volatile or unpredictable market conditions.

What’s more is that hedging decisions should not just be a quick thought of “I am investing in a foreign currency so I should buy a fund that implements hedging”. In reality, this decision requires careful consideration and expertise, and improper hedging strategies can result in unintended consequences or losses. 

Therefore, you should weigh the pros and cons of currency hedging carefully before implementing any strategies. Fortunately, Patterson Mills is here to help, so contact us today!

Considerations You Need To Make

When evaluating whether currency hedging is suitable, there are several consideratinos for you to make.

  1. Determine your risk tolerance and investment objectives
  2. Find out the level of exposure to foreign currencies in your  existing or planned portfolio
  3. Consider the outlook for currency markets, economic fundamentals, and geopolitical developments that could impact exchange rates.
  4. Evaluate the costs associated with currency hedging and compare them to the potential benefits.
    1. This includes considering the impact of hedging costs on investment returns and whether the expected reduction in currency risk justifies the expenses incurred.
  5. Assess the performance of different hedging strategies under various market scenarios and their historical effectiveness in managing currency risk.
    1. Remember, past performance is not indicative of future performance
  6. Consider the prevailing interest rate differentials between currencies
  7. Consult with Patterson Mills

Could Topiary Help Your Investments?

Our Advisers at Patterson Mills understand the importance of currency risk management and offer tailored solutions to help you navigate the challenges of international markets and decide if hedging would be suitable for you.

Whether you’re looking to hedge currency exposure in your investment portfolio or protect your business from currency fluctuations, our team can provide the guidance and support you need.

Get in touch with us today and book your initial, no-cost and no-obligation meeting.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Financial Planning

Should You Rent or Buy Your Home?

Should You Rent or Buy Your Home?

“Some people look for a beautiful place. Others make a place beautiful” ― Hazrat Inayat Khan

3 min read

Should You Rent or Buy Your Home?

Should You Rent or Buy Your Home?

“Some people look for a beautiful place. Others make a place beautiful” ― Hazrat Inayat Khan

3 min read

In the never-ending debate between renting and buying a home, you won’t be surprised to read that there is no one-size-fits-all answer.

Both options come with their own set of advantages and disadvantages, and the decision ultimately depends on various factors unique to your circumstances.

That being said, once you have read this article you will have a much better idea of the considerations to make to find out which one suits you best!

Why Might You Rent a Home?

A key aspect of renting is that it offers the flexibility and freedom that buying does not. It’s a suitable option for those who prefer not to be tied down to a particular location or property for an extended period of time. You would have the flexibility to move to different city or country without the hassle of selling a property. This can be an excellent choice if you are unsure about your long-term plans and prefer not to commit to a specific location.

Moreover, there are far fewer upfront costs involved when renting compared to buying that means there is a lower financial barrier to entry when renting. Whilst you may need to pay a deposit and possible X month’s rent in advance, there are usually much higher upfront expenses involved for homeowners. So, renting can be advantageous for those who are saving up for a down payment or prefer to invest their money elsewhere.

Subject to your rental agreement, you are likely to not be responsible for property maintenance, repairs, or other unexpected expenses associated with homeownership. Instead these tasks could be handled by your landlord or property management company, allowing you to focus on other aspects of your life without the added burden of maintenance.

Why Might You Buy a Home?

On the other hand, homeownership could also be beneficial, and one of the most significant benefits is building equity.

Unlike renting, where monthly payments go to pay your landlord, if you were to buy your home, you would (hopefully!) gradually build equity in your property over time through either paying off a mortgage or your property increasing in value.

This can serve as a valuable asset and source of wealth accumulation, and from this you may even have the opportunity to leverage your property’s equity for other purposes, such as home improvements, education expenses or otherwise (talk to your Patterson Mills Adviser before doing so!).

Additionally, you would have the freedom to customise and personalise your living space according to your preferences. From knocking out walls to landscaping, the autonomy to make such changes is yours without having to seek permission from a landlord.

Owning your home can also provide a sense of stability and security, knowing that you have a place to call your own and be part of a local community of your choice. This is often seen as a milestone and significant investment for many individuals and families.

Buying Versus Renting: Quick Comparisons

When comparing buying and renting, several factors come into play that can influence the decision-making process. Below you will find a simple list of comparisons between the two.

  1. Financial implications
    1. Renting typically involves lower costs though does not have the opportunity for wealth accumulation through the property value or paying off any mortgage.
    2. Buying a home often requires a substantial down payment, higher ongoing costs and maintenance. However, when you own your home, you have the potential for equity accumulation, whilst renting does not provide this wealth-building opportunity.
    3. The right option here for you cannot be said in this article, as it is specific to your financial situation. Buying a home wins on the opportunity to build wealth over time, whilst renting (though not the case in all instances) is likely to win on affordability.
      1. This can change greatly subject to the areas in which you are looking to buy or rent and other circumstances, so make sure to do your own research or talk to your Patterson Mills Adviser.
  2. Flexibility
    1. Renting provide more flexibility in terms of mobility, allowing you to easily relocate or adjust your living arrangements without the burden of selling a property or having any ties to a specific area.
    2. Buying offers stability and flexibility in terms of having the freedom to personalise and invest in the property.
    3. Renting wins on having the most mobility flexibility, whilst buying wins on personalisation.
  3. Stability and Community
    1. Renting may struggle here, subject to how long you stay in one place and whether your landlord continues to rent the property in which you live. Whilst it would indeed be possible to remain in one place for a significant period of time and build valuable friendships in your local area, you may find a lack of stability in knowing how long you would be able to remain, or knowing that you won’t remain for long.
    2. Buying often allows you to feel safe and secure knowing that your property is your own and enables you to have a sense of security and stability as it would be your own decision as to whether you leave the area in which you live, or remain. 
    3. Renting has potential, though in this category would be subject to your rental agreement and the landlord’s future objectives for the property. Buying is likely to provide more security and stability, and so wins on this category.

Which One Is Right For You?

Market conditions and local real estate trends play a significant role in the comparison between buying and renting. In some markets, buying may be more financially advantageous due to lower mortgage rates, favourable home prices, and potential tax benefits. Conversely, in areas with high property prices or volatile housing markets, renting may be a more practical and cost-effective option in the short term.

Evaluating these market dynamics and considering future projections can help yo make informed decisions that align with your financial goals and lifestyle preferences.

The best part is, you don’t have to work it out alone.

Patterson Mills is here to help you every step of the way and assist you in making the decision that is right for you.

Get in touch with us today and book your initial, no-cost and no-obligation meeting.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Investments

How Much Money Do You Need to Live Off Dividends?

How Much Money Do You Need to Live Off Dividends?

“And I had an old-fashioned idea that dividends were a good thing” ― James MacArthur

4 min read

Dividends - Income - How Much Money Do You Need To Live Off Dividend Income

How Much Money Do You Need to Live Off Dividends?

“And I had an old-fashioned idea that dividends were a good thing” ― James MacArthur

4 min read

Dividends are an important part of the total return you achieve within your investments. They are also particularly notable for those looking for income stability.

They offer a reward (payment) for investment in a company’s success and can act as a buffer during market downturns, providing a source of income even when capital appreciation is stagnant or negative.

However, despite the benefits, it’s important to recognise that dividends are not a one-size-fits-all solution and may or may not align with your own financial planning. 

Whilst you could prioritise income generation and value the reliability of dividend payments, you may prefer growth and the reinvestment of earnings for long-term capital appreciation.

Whatever you may decide, it’s important to have knowledge! Luckily, that’s what you will find below, so read on!

Dividends: The Basics

Dividends represent a portion of a company’s earnings distributed to its shareholders as a reward for their investment.

These payments are typically made on a regular basis, such as quarterly or annually, and can vary in amount depending on the company’s profitability and dividend policy.

Dividends are often seen as a sign of financial strength and stability, with companies that consistently pay dividends considered reliable investment options in this area.

The “dividend yield” is how much dividend you could expect to receive per share. This is expressed as dividend divided by a share price. For example, this may be 2.50%.

It is important to note that dividends are not guaranteed and can fluctuate based on various factors, including economic conditions, company performance, and management decisions. During periods of financial distress or economic uncertainty, companies may reduce or suspend dividend payments to conserve cash or address operational challenges.

This can lead to disappointment and financial strain should you be relying heavily on dividend income for your living expenses. As such, it is important to carefully assess a company’s dividend sustainability, financial health as well as many other factors.

The Key Advantages

Naturally, one of the main advantages of dividends is their potential to provide a steady stream of income, regardless of market conditions.

Dividend-paying stocks are often viewed as less volatile than non-dividend-paying stocks, offering a degree of stability and predictability to your portfolio. 

Additionally, dividends can provide tax benefits depending where you are tax-resident, as they are often taxed at a lower rate than other forms of investment income, such as interest or capital gains.

You can also get signals of a company’s financial health and management’s confidence in its future prospects. Companies that consistently pay dividends demonstrate a commitment to returning value to shareholders and may be perceived as more reliable and trustworthy investment opportunities.

Dividend payments can also act as a form of discipline for company management, encouraging diligent capital allocation and discouraging wasteful spending or risky investments.

Uncovering The Disadvantages

Despite their appeal, dividends do come with their share of drawbacks.

  1. Unlike interest payments on bonds, dividends are not guaranteed and can be reduced or suspended altogether if a company’s financial performance deteriorates. 
  2. Furthermore, dividend payments can fluctuate with changes in the company’s earnings or stock price, making them less reliable than you might first think. 
  3. Companies that prioritise paying dividends may have fewer resources available for reinvestment in growth initiatives, potentially limiting their long-term growth prospects.
  4. Dividend income may not keep pace with inflation over time, reducing its purchasing power and eroding the real value of your returns, particularly in environments with high inflation rates.
  5. Investing in dividend-paying stocks may also limit your ability to diversify your portfolio across different asset classes or pursue alternative investment strategies which could lead you to missing out on higher returns elsewhere.

How Much Do You Need To Live Off Dividends?

So, what is the answer to the question of how much you need to live off dividends?

Well, it will (hopefully) come as no surprise that of course it depends on how much income you require!

If you are considering a dividend-focused strategy, you should carefully assess your income needs and risk tolerance.

For example, if you require an income of 100’000 per year and were looking at a dividend yield of 10%, you would need to invest 1’000’000.

To work out much you need, calculate your required income and then the percentage dividend yield you may be able to achieve.

From here, you can find out what initial investment you would need to achieve that percentage return and therefore the income level you desire.

The example above is a useful way of looking at this.

What Are The Next Steps?

Whilst dividends can be an attractive option when seeking income, it’s crucial to weigh the pros and cons carefully and consider how dividends fit into your overall investment strategy.

Yes, it can be complex, and that is exactly why the next steps are to get in touch with Patterson Mills! We understand the complexities of dividend investing and offer expert guidance to help you navigate the world of dividends and achieve your financial goals.

With our expertise and experience, we can help you make the investment choices that give you the best possible chance of success. Get in touch with us today and book your initial, no-cost and no-obligation meeting.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Pensions

Understanding Your Retirement Requirements

Understanding Your Retirement Requirements

“Today people have to be self-reliant if they want a secure retirement income” ― Scott Cook

4 min read

Pension Retirement Requirements

Understanding Your Retirement Requirements

“Today people have to be self-reliant if they want a secure retirement income” ― Scott Cook

4 min read

Retirement planning is a crucial aspect of your financial management, yet it often has many misconceptions and unecessary complexities that can hinder people’s progress in ensuring a they can enjoy a comfortable and worry-free retirement.

Today, we are going to take a look at the intricacies of pension planning, aiming to provide clarity and understanding as to what your own retirement requirements may be.

It’s not just about saving money or having the largest pension fund you can get; it’s about envisioning and actively working towards the kind of retirement lifestyle you desire.

This may well include accruing the largest pension fund you are able, though it also requires making strategic decisions about your finances, health, living arrangements, and leisure activities.

With a comprehensive review of these factors, Patterson Mills are able to formulate a retirement plan that not only sustains you financially, but also supports your overall wellbeing and happiness in your golden years.

Evaluating Your Current Financial Situation

The first step in this process is to assess your current financial position. 

This involves evaluating your income, expenses, savings, investments, and any existing pension provisions you may have. Understanding this information allows you to set realistic retirement goals and devise a tailored pension strategy.

You might also spot any areas for improvement or potential obstacles to achieving your retirement goals that you did not even know were there! In essence, gaining clarity on your financial position can help you make informed decisions and take proactive steps to secure your financial future.

Setting Retirement Goals

Setting clear and achievable retirement goals is a great idea when it comes to effective pension planning.

Consider factors such as your desired retirement age, lifestyle aspirations, healthcare needs, and potential legacy plans.

Moreover, it’s crucial to factor in inflation and a potential rise in the cost of living when setting retirement goals. Whilst it may be challenging to estimate future expenses, incorporating inflation figures (or at least, estimated / average inflation figures) into your calculations ensures that your retirement savings will adequately cover your lifestyle needs and expenses over time. 

Additonally, be realistic about your retirement goals! There is no point in setting yourself a goal that might be near-impossible to achieve as it may needlessly negatively impact your mindset when approaching retirement planning.

Periodically reassessing your retirement goals and adjusting your pension plan accordingly is also necessary as your circumstances evolve. Life events such as marriage, parenthood, career changes, or unexpected expenses may necessitate modifications to your retirement strategy and ultimate retirement goals.

Pension Contribution Strategies

Once you’ve evaluated your current financial situation and defined your retirement goals, it’s time to implement a pension contribution strategy (i.e. putting some savings aside!).

This involves determining how much you need to save regularly to achieve your desired retirement income. Explore options such as employer-matched contributions, voluntary contributions, and tax-efficient pension schemes to maximise your savings potential.

You could also automate your pension contributions to ensure consistency and discipline in your saving habits. Setting up automatic transfers from your salary or bank account to your pension fund can streamline the saving process and prevent procrastination or impulsive spending.

As you progress in your career or experience changes in your financial situation, you could also consider increasing your pension contributions accordingly.

Aiming to contribute a percentage of your income, for example around 10% or more, towards your pension fund can help you stay on track towards your retirement goals. When adopting a proactive approach to pension contributions and regularly reassessing your saving strategy, you can enhance the growth of your retirement nest egg and ensure a comfortable financial future.

Who Do You Talk To?

Now you understand the very basics of how you can implement a solid retirement planning strategy and navigate the complexities with ease. However, this article is just scratching the surface.

It is far easier said than done when formulating and implementing such plans, but fear not! Patterson Mills are your specialists in all things retirement planning and we are here to guide you through every step of the process.

From assessing your financial situation to designing a tailored pension strategy, we will ensure that you are able to make informed decisions and have the best possible chance of achieving your retirement goals. 

Don’t let uncertainty hold you back from planning for your future — get in touch with us and book your initial, no-cost and no-obligation meeting. Take control of your retirement journey, today!

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Investments

Re-Invest Or Withdraw? Accumulation Versus Income Funds

Re-Invest Or Withdraw? Accumulation Versus Income Funds

“Mutual funds were created to make investing easy, so consumers wouldn’t have to be burdened with picking individual stocks” ― Scott Cook

3 min read

Dividend Investing vs. Income Withdrawals - Accumulation - Compounding - Investments

Re-Invest Or Withdraw? Accumulation Versus Income Funds

“Mutual funds were created to make investing easy, so consumers wouldn’t have to be burdened with picking individual stocks” ― Scott Cook

3 min read

Within the world of mutual funds and exchange-traded funds (ETFs), you will often have the choice to opt for accumulation or income.

What’s the difference you may ask?

Put simply, accumulation funds re-invest any income or dividends generated by the underlying assets back into the fund.

On the other hand, income funds distribute any income generated by the underlying assets to you, the investor. This is often in the form of cash dividends or interest payments.

However, just knowing what these are is not necessarily enough to make informed decisions on your investments. Which type is suitable for you? What are the benefits? Read on to find out!

Accumulation Funds

Accumulation funds, often shortened to ‘Acc’ or known as ‘capital growth’ funds, are designed for those who wish to re-invest any income back into the fund in which they are invested.

With this type of investment, the process is automatic and any dividends, interest payments or other distribution types will be re-invested without you having to do anything (at least, nothing beyond buying into the fund in the first place!).

Why might you wish to do this? Because you will benefit from compound growth over time that could have a huge impact on the gains you see when you come to withdraw in the future!

As an example, should you have CHF 1’000 invested and receive a CHF 100 distribution (e.g. as a dividend payment), you would then have CHF 1’100 invested (if you did not take it as income). This is CHF 100 more that can potentially increase both your returns and even future distribution payments.

The longer you leave your funds, the more time this type of approach has to grow your wealth. Hence, this strategy is typically better-suited if you have a longer-term investment horizon and prioritise capital appreciation.

Income Funds

Income funds, you will not be surprised to read, are also sometimes known under another name!

Not only are the often shortened to ‘Inc’, they are alternatively known as ‘distribution’ funds (sometimes shortened to ‘Dist’). As mentioned, these types of investment provide regular income paid out as dividends, interest or through other means.

Income funds are generally more suitable for when you are retired or if you are relying on investment income to cover defined living expenses.

Naturally, this makes the key advantage of income funds exactly that: their ability to provide a steady stream of income. 

What’s more, this income is provided to you without the need to sell off your shares!

Which One Is Right For You?

Now you know what both types of funds are, who they may be more suitable for and how they could benefit you.

This then leaves the question: which one should you choose?

Naturally, each of you reading this will be unique and there is no one-size-fits-all answer.

So, when deciding between accumulation or income funds, consider your investment objectives, risk tolerance and income needs. If you have quite some time before you wish to access your investments, you may be more suited to accumulation funds. On the other hand, income funds provide a regular income that you may prefer.

However, in both cases, assess any tax implications, fees and the benefits you may receive from compounding, or the potential drawbacks if you take the income out of the investment.

Here For You

There are more considerations than those which are in this article, and so you are must do your own research before making any decisions.

Yes, it can be complex, but Patterson Mills are here to help and explain your options in a jargon-free manner that ensures your complete understanding of your most effective route forward.

So, get in touch with Patterson Mills and book your initial, no-cost and no-obligation meeting. Your future financial success is our priority!

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Protection

Estate Planning Essentials for Your Legacy

Estate Planning Essentials for Your Legacy

“Estate planning is an important and everlasting gift you can give your family. And setting up a smooth inheritance isn’t as hard as you might think” Suze Orman

3 min read

Estate Planning Essentials

Estate Planning Essentials for Your Legacy

“Estate planning is an important and everlasting gift you can give your family. And setting up a smooth inheritance isn’t as hard as you might think” Suze Orman

3 min read

Estate planning is a vital aspect of financial planning that often receives less attention than other areas. Whilst topics like budgeting, investing and retirement planning are quite commonly referenced and may seem more immediate, neglecting estate planning can have significant consequences for your loved ones and the legacy you leave behind.

Today, we are here to give you the estate planning essentials you need to ensure this area of your planning can be managed effectively.

First Things First, Draft a Will

Drafting a Will is a great place to start with your estate planning. It will allow you to specify how your assets will be distributed among your beneficiaries should the worst occur. A well-written Will should outline your wishes regarding property, finances, and personal belongings, leaving no room for ambiguity or disputes amongst your heirs.

In addition to asset distribution, your Will can address other important considerations, such as the appointment of guardians for minor children and the designation of an executor to manage your estate.

We recommend seeking legal advice to ensure that your Will complies with applicable laws and accurately reflects your intentions, though this is not always necessary. You should also review your will on an ongoing basis to reflect any changes in your circumstances.

Establishing Trusts for Asset Protection

Establishing trusts can be an effective way to protect your assets and provide for your beneficiaries in a controlled manner. Trusts offer flexibility in asset management, allowing you to specify conditions for distributions and appoint trustees to oversee the administration of assets.

By placing assets in trusts, you can shield them from creditors, minimise estate taxes, and ensure that they are preserved for the intended beneficiaries. There are various types of trusts available, each serving different purposes and offering unique benefits.

For this, we recommend consulting with a legal Adviser or Patterson Mills Financial Adviser to help you determine the most suitable trust structure for your estate planning requirements.

Maximising Tax Efficiency through Estate Planning Strategies

Estate planning offers opportunities to minimise tax liabilities and maximise the value of your estate for future generations. By employing various tax-efficient strategies, you can reduce the impact of estate taxes, income taxes, and capital gains taxes on your assets, preserving more wealth for your heirs. Strategies include gifting, charitable giving, and the use of trusts (as above). These can help you achieve your objectives whils also leaving a lasting legacy.

One common tax-saving strategy in estate planning is the annual gifting of assets to beneficiaries, which can help reduce the size of your taxable estate over time. It is important that you check whether this is applicable in your country of residence.

Additionally, charitable giving through vehicles such as donor-advised funds or charitable trusts can provide tax benefits while supporting causes that align with your values. By incorporating these strategies into your estate plan and working closely with tax professionals, you can optimize the tax efficiency of your estate and leave a lasting financial legacy for future generations.

Planning for Potential Incapacity in Advance

In addition to addressing the distribution of assets after death, estate planning also involves preparing for potential incapacity during your lifetime. Authorisations such as a power of attorney allow you to designate those you trust to make financial and medical decisions on your behalf, should you be unable to do so. These documents ensure that your wishes are respected and that your affairs are managed according to your preferences even if you are unable to communicate them directly.

Authorisations such as these are essential for everyone, regardless of age or health status, as unexpected events can occur at any time. By proactively planning, you can avoid potential conflicts and legal complications whilst ensuring that your interests are protected and your financial and healthcare decisions are handled by those that you trust.

Reviewing and Updating Your Estate Plan Regularly

Estate planning is not a one-off exercise. Rather, it is an ongoing process that requires regular review and updates to reflect changes in your life circumstances and financial situation. Life events such as marriage, divorce, the birth of children, or significant changes in assets should prompt a reassessment of your estate plan to ensure that it remains relevant.

To ensure that your estate planning requirements are managed professionally and effectively, get in touch with Patterson Mills and book your initial, no-cost and no-obligation meeting. You will thank yourself later!

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Categories
Financial Planning

Printing Money: What is Quantitative Easing?

Printing Money: What is Quantitative Easing?

“Printing money is merely taxation in another form” ― Peter Schiff

5 min read

Printing Money - Quantitative Easing

Printing Money: What is Quantitative Easing?

“Printing money is merely taxation in another form” ― Peter Schiff

5 min read

Quantitative Easing, a tool in the arsenal of central banks, has become increasingly prominent in monetary policy. This approach involves the deliberate and substantial purchase of financial assets, most commonly government bonds, by the central bank. The ultimate goal is to influence (increase) the money supply, interest rates, and overall economic activity.

Today, we are looking at the dynamics of Quantitative Easing and finding out why it may be useful, why it may be bad, and what it’s all about! Read on to find out more.

Defining Quantitative Easing

Unlike traditional monetary policies that involve adjusting short-term interest rates, Quantitative Easing focuses on expanding the money supply and influencing long-term interest rates. The central bank achieves this by purchasing financial assets, as mentioned above these are primarily government bonds, from the market. The objective here is to inject a significant amount of money into the financial system, encouraging lending, investment, and overall economic growth.

At its core, the actual process of Quantitative Easing involves the central bank creating new money electronically. This newly created money is then used to buy financial assets and in doing so, provides the institution from which the assets were bought with with additional liquidity.

In its simplest form, Quantitative Easing is the process of printing money (but, legally!) to increase the supply of money in an economy.

The Positive Side

Below we provide some of the positives to Quantitative Easing and how it attempts to benefit an economy:

  1. Stimulating Economic Growth: At its core, Quantitative Easing operates as an engine for economic growth. By injecting a substantial amount of money into the financial system, central banks aim to boost spending and investment. As this newly created money circulates through the economy, businesses find themselves with enhanced liquidity, which, in turn, fuels expansion, job creation, and a general uptick in economic activity.

  2. Lowering Interest Rates: One of the primary mechanisms through which Quantitative Easing exerts its influence is by manipulating interest rates. As the central bank engages in large-scale bond purchases, it effectively increases demand for these securities, driving up their prices. Conversely, when bond prices rise, yields fall. This phenomenon leads to a lowering of interest rates across the spectrum. The strategic intent here is to incentivise borrowing, both for businesses seeking capital for expansion and individuals considering major purchases like homes or automobiles.

  3. Fighting Deflation: In the face of deflationary pressures, Quantitative Easing serves as an antidote. Deflation, characterised by a sustained decrease in general price levels, can be detrimental to economic health as it encourages consumers to delay spending in anticipation of lower prices in the future. By flooding the market with additional money, Quantitative Easing stimulates demand, helping prevent the onset of a deflationary spiral.

The Negative Side

Naturally, there are also some downsides, too! A few of these are as follows:

  1. Wealth Inequality: Whilst Quantitative Easing aims to bolster economic activity, its benefits are not always distributed equitably. One of the major criticisms is its potential to exacerbate wealth inequality. As the central bank’s asset purchases drive up the prices of financial assets, those who hold significant investments in stocks and bonds reap substantial gains. On the other hand, those without significant financial holdings might not experience a proportional improvement in their economic circumstances.

  2. Market Distortions: The sheer magnitude of funds injected into financial markets during the Quantitative Easing process can create distortions. Asset prices, including those of stocks and real estate, may experience substantial inflation. This, in turn, can lead to speculative bubbles and misallocation of resources as investors chase returns in an environment where traditional valuation metrics may become disconnected from economic fundamentals.

  3. Interest Rate Risks: As central banks persistently engage in Quantitative Easing, they face challenges when attempting to normalise interest rates. A prolonged period of low interest rates can create a sense of dependency, making it difficult to implement rate hikes without unsettling financial markets and the broader economy. Striking the delicate balance between stimulating growth and avoiding excessive risk-taking becomes a crucial task for monetary authorities.

Should Quantitative Easing Be Used? If So, When?

The use of quantitative easing is a complex decision that depends on various economic factors, and its appropriateness is often subject to debate among policymakers and economists to this day.

Quantitative Easing is typically considered when traditional monetary policy tools, such as adjusting interest rates, prove insufficient in addressing economic challenges, especially during periods of economic downturns.

So, when should it be used? Here are a few key considerations as to when and if Quantitative Easing should be employed:

  1. Economic Downturns and Deflationary Pressures

    1. For example, when an economy is facing a severe recession, high unemployment, and deflationary pressures (falling prices).

    2. How does Quantitative Easing help? It can stimulate economic activity by injecting liquidity into the financial system, lowering interest rates, and encouraging borrowing and spending.

  2. Ineffective Conventional Monetary Tools:

    1. For example, when central banks have already lowered interest rates close to zero, and further rate cuts are deemed ineffective.

    2. How does Quantitative Easing help? It becomes an alternative tool to influence long-term interest rates and provide additional monetary stimulus.

  3. Balancing Risks and Benefits:
    1. For example, when policymakers carefully assess the potential risks and benefits of Quantitative Easing, it can then be implemented, or not.
    2. How does Quantitative Easing help? In this example, it is more a case of weighing up whether it is suitable to implement. Quantitative Easing has potential side effects as we have discussed, and so only after policymakers have weighed these risks against the potential benefits for economic recovery should it be implemented.

Making Your Investments Print Money

Printing money is not often legal when implemented by a member of the public, so we advise against it! However, what you can control is what you are investing in, and this in turn influences the returns you can achieve. For example, if you invest over 5-years and your funds grow by 500%, it is as if you have printed money!

Whilst we will not guarantee you a 500% return over 5-years, we can guarantee that your investments will be well looked after if you get in touch with Patterson Mills and book your initial, no-cost and no-obligation meeting. Financial success and a worry-free future starts with Patterson Mills.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all information within this article has been prepared for informational purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.