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    Tuesday, January 31, 2006

    How to be flexible in investment

    Keeping your options open is a good idea when it comes to finance and investment. Here’s why. Life is pretty unpredictable. We get good surprises, like a great job offer abroad, or the dream home you always admired being suddenly on the market. Then there are bad ones, like a divorce or an elderly relative who needs to go into residential care. Even if you have some tidy resources, these developments have a habit of throwing your finances out of kilter. So how do we cope with these events? There are three basic principles which have to be weighed up when we plan how flexible we need our savings and investments to be: Liquidity – how easy it is to turn investments or assets into cash without loss of value Credit – how easy it is to get reasonable cost loans at short notice Opportunity cost – the loss of return you may suffer for not committing your cash to the best performing investment However, there are some intriguing subtleties beyond these regarding fixed-rate mortgages, product tie-ins and so on, which I will deal with later in the piece. Liquidity is crucial How soon can you lay hands on some cash? And how much will you need? Ideally, your liquidity profile will be ‘stepped’ over time. That means, for example, you could lay hands on 50 quid at a moment’s notice if you notice an end-of-line bargain jacket in the sales. That is something we all do. Even £500 to pay for a minor car bump that needs fixing in a day or two shouldn’t be any trouble if we have a credit card or a savings account. But £10,000 for a house deposit may need some getting together. All investments and assets can be graded by liquidity: Cash in your wallet, of course, is completely liquid Current and savings accounts are highly liquid Stocks and shares are quite liquid. You can sell any time the market is open so long as you are not picky about the price. It still takes a few days to get hold of the proceeds Cars, antiques, art, stamp and wine collections are fairly illiquid. You can sell them quickly if you’re desperate, but you the chances are you won’t get the price you wanted. Property is illiquid. Even if you make a quick sale, you still won’t get the money for a while Fixed term investments are generally illiquid. Whether they are Guaranteed Equity Bonds, five year investment bonds or with-profits policies, getting out early is either impossible or costly. See also: How to simplify your investments Credit’s role This is where credit plays its part. Some of the most illiquid assets can become liquid if you can borrow against them. You can now get a competitive and sizeable loan agreed within an hour if you are a homeowner. Renters and council tenants have much greater trouble accessing comparable sums at reasonable cost. Those on benefits, who often need cash at short notice more than anyone, have no recourse at all except to doorstep lenders who may charge 75% a year. The same principle has always applied to loans: You can have it so long as you don’t really need it. That is why the wealthy don’t generally need to make the same precautions for liquidity as the rest of us: Banks are always falling over themselves to lend to them. Opportunity cost This is a trickier idea. If you are highly cautious you could meet any likely cash need by keeping all your money in a savings account. And many millions do. With the best cash mini-ISAs paying more than 5% gross, it has its attractions, though the majority keep their money at rates which are half this or worse. The trouble with caution is that if you look out for all today’s rainy days, you will fail to provide for the biggest one which is coming to us all: how to fund 20 or 30 years of retirement. That is why most of us commit to less flexible investment, because we need to get better long-term returns than are offered by the average savings account. Principally that is through buying shares, plus government and corporate bonds. The bottom line is that performance and liquidity tend to pull in opposite directions, and you need to get a little of each. Things now get a little bit more subtle The enormous range of financial products available now gives us a huge array of deals, many of which may look good value but can reduce the flexibility we have. A fixed-rate mortgage may look great, for example. I took one out myself in 2002 at 5.25% when mortgage rates were at four-decade low. Well, they went lower still, and the best current deals at around 4.8% are still lower than my fixed rate. However, I can’t get out until January 2007 without paying an £1,800 penalty. I’m losing a little, but if rates had soared I would have saved a lot more than I’m losing now. Likewise, I fixed my gas and electricity prices in July 2003 for three years in an innovative deal with Scottish Power. That turned out to be a winner, because energy prices have soared 20% since. Had they fallen dramatically, something I thought unlikely, I could have switched to another provider with only a minor penalty. Click here to find the best deal for your home gas, electricity, broadband and phone bills Here are some examples of inflexibilities that we as savings and investors frequently have to grapple with. Up-front charges Mortgages with arrangement fees, set-up costs for self-invested personal pensions and initial charges for fund investments are all cases of up-front charges. Though obviously providers do incur costs for setting up and compliance, the effect is to restrict your subsequent freedom of action. Product tie-ins Many mortgage providers may offer us a great deal on the interest rate, but only if we take their building insurance. Quite often this is £50-£80 a year more than a competitive quote. Though building societies are no longer allowed to make that exclusion absolute, they tend to charge you a £30-£50 ‘admin charge’ if you go elsewhere, and every year that you subsequently switch provider. That makes shopping around very expensive. Exit charges An increasingly broad array of products levy exit charges which limit your ability to exercise consumer choice. These include personal pensions, self-invested personal pensions, with-profit funds, fixed-rate mortgage deals and of course with-profit funds. The classic case is mutual insurer Equitable Life which effectively locked in its customers with hefty exit fees, while lowering the value of the future payments they would receive. Even stockbrokers charge exit fees for transferring lines of stock to a new broker. Some good news It isn’t all gloom of course. The biggest inflexibilities, like those exhibited by with-profits funds, are withering on the vine as more investors switch to low-cost market trackers. Some financial providers, especially stockbrokers, are offering to pay hundreds of pounds of your exit penalties if you switch to them. Overall, we are usually getting something in exchange for the loss of flexibility. We just have to make sure that we do not undervalue flexibility and build some in wherever possible. Here are a few rules of thumb to help keep as much flexibility as possible: Always have a big chunk of cash in a high-interest instant access account If you choose a fixed-rate mortgage, find one with no penalties for early repayment. Prefer capped rate mortgage deals over fixed-rate, other things being equal. That way you get to share in any further rate falls. Unless you have a strong feeling about the course of interest rates, or no financial discipline, consider an offset mortgage as the most flexible way to repay your mortgage. Think twice before folding all your past employer’s occupational pensions into one. This is a portfolio like any set of investments. Some schemes have superior deferred pensioner upratings, some may switch your defined benefit to a defined contributions. There is even the chance that your former employer may close the scheme. This is a complex area and independent advice may be wise. Don’t consider tying up money in a fixed-term investment bond unless it will clearly outperform the best instant access funds Look after your credit rating. You never know when you may need it.

    How to be flexible in investment

    Keeping your options open is a good idea when it comes to finance and investment. Here’s why. Life is pretty unpredictable. We get good surprises, like a great job offer abroad, or the dream home you always admired being suddenly on the market. Then there are bad ones, like a divorce or an elderly relative who needs to go into residential care. Even if you have some tidy resources, these developments have a habit of throwing your finances out of kilter. So how do we cope with these events? There are three basic principles which have to be weighed up when we plan how flexible we need our savings and investments to be: Liquidity – how easy it is to turn investments or assets into cash without loss of value Credit – how easy it is to get reasonable cost loans at short notice Opportunity cost – the loss of return you may suffer for not committing your cash to the best performing investment However, there are some intriguing subtleties beyond these regarding fixed-rate mortgages, product tie-ins and so on, which I will deal with later in the piece. Liquidity is crucial How soon can you lay hands on some cash? And how much will you need? Ideally, your liquidity profile will be ‘stepped’ over time. That means, for example, you could lay hands on 50 quid at a moment’s notice if you notice an end-of-line bargain jacket in the sales. That is something we all do. Even £500 to pay for a minor car bump that needs fixing in a day or two shouldn’t be any trouble if we have a credit card or a savings account. But £10,000 for a house deposit may need some getting together. All investments and assets can be graded by liquidity: Cash in your wallet, of course, is completely liquid Current and savings accounts are highly liquid Stocks and shares are quite liquid. You can sell any time the market is open so long as you are not picky about the price. It still takes a few days to get hold of the proceeds Cars, antiques, art, stamp and wine collections are fairly illiquid. You can sell them quickly if you’re desperate, but you the chances are you won’t get the price you wanted. Property is illiquid. Even if you make a quick sale, you still won’t get the money for a while Fixed term investments are generally illiquid. Whether they are Guaranteed Equity Bonds, five year investment bonds or with-profits policies, getting out early is either impossible or costly. See also: How to simplify your investments Credit’s role This is where credit plays its part. Some of the most illiquid assets can become liquid if you can borrow against them. You can now get a competitive and sizeable loan agreed within an hour if you are a homeowner. Renters and council tenants have much greater trouble accessing comparable sums at reasonable cost. Those on benefits, who often need cash at short notice more than anyone, have no recourse at all except to doorstep lenders who may charge 75% a year. The same principle has always applied to loans: You can have it so long as you don’t really need it. That is why the wealthy don’t generally need to make the same precautions for liquidity as the rest of us: Banks are always falling over themselves to lend to them. Opportunity cost This is a trickier idea. If you are highly cautious you could meet any likely cash need by keeping all your money in a savings account. And many millions do. With the best cash mini-ISAs paying more than 5% gross, it has its attractions, though the majority keep their money at rates which are half this or worse. The trouble with caution is that if you look out for all today’s rainy days, you will fail to provide for the biggest one which is coming to us all: how to fund 20 or 30 years of retirement. That is why most of us commit to less flexible investment, because we need to get better long-term returns than are offered by the average savings account. Principally that is through buying shares, plus government and corporate bonds. The bottom line is that performance and liquidity tend to pull in opposite directions, and you need to get a little of each. Things now get a little bit more subtle The enormous range of financial products available now gives us a huge array of deals, many of which may look good value but can reduce the flexibility we have. A fixed-rate mortgage may look great, for example. I took one out myself in 2002 at 5.25% when mortgage rates were at four-decade low. Well, they went lower still, and the best current deals at around 4.8% are still lower than my fixed rate. However, I can’t get out until January 2007 without paying an £1,800 penalty. I’m losing a little, but if rates had soared I would have saved a lot more than I’m losing now. Likewise, I fixed my gas and electricity prices in July 2003 for three years in an innovative deal with Scottish Power. That turned out to be a winner, because energy prices have soared 20% since. Had they fallen dramatically, something I thought unlikely, I could have switched to another provider with only a minor penalty. Click here to find the best deal for your home gas, electricity, broadband and phone bills Here are some examples of inflexibilities that we as savings and investors frequently have to grapple with. Up-front charges Mortgages with arrangement fees, set-up costs for self-invested personal pensions and initial charges for fund investments are all cases of up-front charges. Though obviously providers do incur costs for setting up and compliance, the effect is to restrict your subsequent freedom of action. Product tie-ins Many mortgage providers may offer us a great deal on the interest rate, but only if we take their building insurance. Quite often this is £50-£80 a year more than a competitive quote. Though building societies are no longer allowed to make that exclusion absolute, they tend to charge you a £30-£50 ‘admin charge’ if you go elsewhere, and every year that you subsequently switch provider. That makes shopping around very expensive. Exit charges An increasingly broad array of products levy exit charges which limit your ability to exercise consumer choice. These include personal pensions, self-invested personal pensions, with-profit funds, fixed-rate mortgage deals and of course with-profit funds. The classic case is mutual insurer Equitable Life which effectively locked in its customers with hefty exit fees, while lowering the value of the future payments they would receive. Even stockbrokers charge exit fees for transferring lines of stock to a new broker. Some good news It isn’t all gloom of course. The biggest inflexibilities, like those exhibited by with-profits funds, are withering on the vine as more investors switch to low-cost market trackers. Some financial providers, especially stockbrokers, are offering to pay hundreds of pounds of your exit penalties if you switch to them. Overall, we are usually getting something in exchange for the loss of flexibility. We just have to make sure that we do not undervalue flexibility and build some in wherever possible. Here are a few rules of thumb to help keep as much flexibility as possible: Always have a big chunk of cash in a high-interest instant access account If you choose a fixed-rate mortgage, find one with no penalties for early repayment. Prefer capped rate mortgage deals over fixed-rate, other things being equal. That way you get to share in any further rate falls. Unless you have a strong feeling about the course of interest rates, or no financial discipline, consider an offset mortgage as the most flexible way to repay your mortgage. Think twice before folding all your past employer’s occupational pensions into one. This is a portfolio like any set of investments. Some schemes have superior deferred pensioner upratings, some may switch your defined benefit to a defined contributions. There is even the chance that your former employer may close the scheme. This is a complex area and independent advice may be wise. Don’t consider tying up money in a fixed-term investment bond unless it will clearly outperform the best instant access funds Look after your credit rating. You never know when you may need it.

    How to sell with style

    More than 90% of the effort in investing goes into what shares to buy and when, but in fact selling well is every bit as important. Here’s a simple guide to make sure that you reap the rewards for your hard work. There are lots of investors out there who do the two worst things you can do with a share portfolio. One, they sell their winning shares too soon, in an enthusiasm to bank a profit before it disappears. Secondly, and perhaps even worse, they hang on to losing shares praying that they will return to profit. The net effect of this is that the shares that tend to stay in the portfolio for a long time are the losers they can’t get rid of, and not the winners which should be powering the portfolio’s improvement. If this applies to you, don’t worry: It’s a well-known psychological problem, no-one is completely immune from it, and you can quickly start to put it right. Running profits and cutting losses “Run your profits and cut your losses” is perhaps the oldest City saying. Unlike many cliches, it really works. It works because share price trends persist much longer that we expect. Shares rise get noticed and written about, more investors buy them and so long as the expected profit rise is delivered (a crucial point), a gradual process of re-rating begins. A re-rating means that the shares rise not only because there are more earnings per share, but hopes for further growth means that each penny of earnings per share is itself worth more. This is reflected in a higher price/earnings ratio and reflects an expectation that profit growth can continue into the future. Take a look at the share price rises of these companies and just see how sustained the rises have been. Ashtead, which has beaten the FTSE all-share by 300% over three years Peacocks, which has beaten the same index by 290% over 3 years Public sector housing firm Mears, which has managed a similar performance High performing shares These are high performing shares. The first two have recovered from being under-appreciated, and in Ashtead’s case from being close to financial collapse, while Mears was virtually unknown three years ago. All three have benefited from re-ratings which has accorded greater value to each penny of their earnings. Here’s how re-ratings work Let us say we bought shares for 100p in an engineering firm which last year had earnings of 10p per share (a price earnings ratio of 10) and had a history of increasing its earnings by 10% a year. This is textbook fair value, a P/E to earnings growth ratio of one. However, this year one of the firm’s products is very successful and earnings per share rise to 12.5p, a growth of 25%. The shares duly rise by 25% to 125p, (still a P/E of 10) but after a second year of 25% EPS growth to 15.6p, the market realises this is not a dull engineering company at all, but an exciting growth company that should be valued at a P/E of 25. The re-rating then begins in earnest and the shares take off. An EPS of 15.6p rated at 25 times makes a share price of 390p, almost quadruple what you paid for the shares in just over two years! Jargon buster: P/E ratios explained So when should you sell? This example merely serves to illustrate how apparently modest improvements in earnings growth can catapult share prices higher. So when should you sell? You don’t have to even consider it until the growth potential of the company is reflected in the price, that is when the P/E ratio matches the expected rate of earnings growth. In fact, for shares that show strong price momentum, you probably don’t need to sell until they are actually expensive as measured by the P/E ratio. Some companies are only a little under-rated and after a 10% rise are rated in P/E terms line with their rivals in the same sector (another important concept), while others demonstrate such superior growth, as in the example above, that even a doubling in the share price doesn’t fully account for the potential. When there are doubts Inevitably there are doubts about the right moment to sell. Even the best shares have weeks or even months when the share price flags and it looks like investors are tiring of the story. Generally, there is no harm in taking a partial profit, a process known as top-slicing, if you have doubts. Alarm bells should certainly sound if the share has risen so much that it starts to dominate your portfolio, accounting for, say, more than a quarter of your investments. Though continued rises may be making you wealthy, you have to account for the increasing risk that you are running. In such circumstances, top-slicing is again a useful tactic, lowering the risk, but still letting you harness some of the continuing gains. Cutting losses The same kind of process occurs with losses, especially where those losses are specific to the firm rather than market wide. Profit warnings are the usual problem. They drive price falls which can last months or even years, while management gets to the root cause. Seasoned investors know that one warning is usually followed by at least two more, and in the worst cases by a collapse in the firm. Earnings multiples get compressed by de-ratings, which magnify the fall in the share price just as re-ratings magnify the rises. Getting out immediately may be painful, but it is far less destructive on your investment capital than hanging on, anxiously praying for a recovery

    How to invest for children

    Investing for kids should be easier than investing for adults, but it doesn’t always work out that way. The great thing about investing for children is that there is a really long time to see your results come to fruition, and the power of compound interest can make its mark. This opens up a really wide range of share market investment opportunities which might be seen as too unpredictable over, say, five years, but which reliably grow strongly over 10 or 20 years. There are now plenty of tax benefits too, as the government tries to encourage us not only to make provision for children but to instil the savings habit in youngsters. Your primary aim The options open to parents, grandparents and others when funding children very much depend on what the aim of the investment is. The idea might be to fund private education, in which case funds would be released by age 11 at the latest. If the aim is to provide funding for university, then you are likely to have a longer time horizon until the child is aged 18. By then, of course, the child is likely to have his or own views about what the money should be spent upon. Expect to receive pleadings in favour of a pony or motorcycle. The very far-sighted may even want to help a child fund its own pension, a tremendous gift that few benefactors will live to see come to fruition, but which has big tax advantages to both giver and recipient. Simple principles Whether your aims are specific or just to give a child a little help along the way, the same principles apply in investing for children as for investing on your own account. Start as early as possible Get the best rate of return you can Pay the lowest possible overheads consistent with point two Keep the money there to do its work Reinvest all dividends and interest Make the best of the tax incentives available Starting early This should be easy. Even hard-pressed parents will receive gifts at the time of a child’s birth. If you let grandparents and others know before the birth that you would like to invest for the child’s future, you should be able to get some gifts in cash. In terms of performance, a lump sum is best, but even modest regular contributions will soon add up. For a lump sum of £1,000 at birth, a cheap share fund would typically produce a sum of £3,380 at 18, £7,600 at 30 and £80,000 by aged 65. For the full duration that is an 80-fold return, or 25-fold once typical inflation is taken into account. (All the figures here are derived from typical stock market performances over the last 100 years as recorded in the Barclays Equity Gilt study 2005) Spending power comparisons Let’s stick with post-inflation returns, because they measure the true spending power of the money put away. Just £1 a week from birth, if invested in a cheap stock market fund would be worth £1,488 by the time a child is aged 18, £3,500 by 30 and a whopping £25,000 by age 65. However, if that money was kept in a typical savings account the figures would be much lower: £1,020 at 18, £1,809 at 30 and just £4,700 by 65. There are two points I’m driving at here. One is that the early money multiplies most. The £1,000 lump sum is worth £25,000 by 65 in real terms, the same as that produced by contributing £1 a week. But the total cost of £1 a week of contributions is £3,380, three times as much as the lump sum for the same result. Not a little better, a lot better The second point is that a stock market-based account is not just going to be a little better than a savings account, but a lot better, and the longer the period of investment the more clearly you will see it. There is only an 8% chance over any 10-year period that a typical savings account will outperform shares, according to research group WM. That doesn’t mean to say you shouldn’t encourage children to have a savings account. It can certainly help them understand money and savings. Even as young as 10, they will be able to make deposits and perhaps withdrawals and watch the accumulation that takes place. These lessons are learned just as well for a few pounds as for a few hundred, any serious long-term money should be in pursuit of better returns. Tax background Children, you may be surprised to learn, have their own personal tax allowance and it’s the same as yours and mine. For 2005/06 they can earn £4,895 before they get taxed. That means they would need to have saved £100,000 or so before their interest income exceeds this amount. In practice, though, this rule is irrelevant because parents will be contributing for them, and they are only allowed £100 of interest tax free per parent. This £200 is about what you earn on £4,000-£5,000 of savings. Worse still, if your child earns more than £200 a year interest, the whole of the interest, not just the excess is taxed on the parent. This is really a mechanism to prevent parents from holding their own cash savings in their children's names and taking advantage of the tax allowances. Note, however, that this tax limit does not apply to other relatives. Where a number of different relatives are contributing it may be worth splitting accounts, one for parents and one for others. Register for gross interest If you go to open a savings account in a child’s name, take the birth certificate, fill in form R85 at the bank or building society and return it to the Inland Revenue to get interest paid gross. Compare savings rates See also a very comprehensive 2003 article by my colleague Nic Cicutti on a wider range of savings options for kids Children are much more restricted when it comes to share investing. They are not allowed to have ISAs until they are 16, and then only a cash Mini-ISA. For share ISAs they must be 18. Likewise, most stockbrokers won’t accept applications to open accounts from those who are not yet 18, though you can open a custodial account on their behalf. Child Trust Fund The chancellor’s much-fanfared Child Trust Fund is a brave attempt to kick-start the savings habit among families with children. Every child in the UK born on or after September 1 2002 and receiving child benefit will be sent a payment of £250. Children from poorer families will receive £500. A second, yet-to-be disclosed handout (but expected to be £250) is promised when each child turns seven. About 700,000 children are expected to receive the payment voucher each year and parents have 12 months to decide what to do with it. There are three things you can do with the money. You can stick it in a savings account or one of two types of share-based investment account: One of these is a stakeholder account with a maximum annual fee of 1.5% and no other hidden fees allowed, while the other is a non-regulated account with a wider choice of investments and no fee limitation. Parents and other relatives can contribute up to £1,200 a year. There are no taxes on this, but the cash cannot be withdrawn until the child is 18. In stakeholder accounts, the funds must be “lifestyled” when the child is 13, which means they are moved to a more cautious investment vehicle to guard against a sharp fall in the stock market. Read more about Child Trust Funds Snags abound Gordon Brown’s plan is well-meaning, but is unlikely to change many savings habits. Surveys show that two-thirds of recipients eventually put the vouchers into a conventional savings account because they are unaware of the advantages of a stock market investment over this period. The stakeholder accounts allow a much too high 1.5% annual fee. Not one of the participating plans that I found went below this maximum, even if they are providing tracker funds. Over 18 years, a 1.5% annual fee will typically eat up a quarter of the contributions made. By contrast, ordinary tracker funds that you could put in an ISA can now be had for 0.3% or less. Fidelity has just this week cut its fees to just 0.1% Daft lifestyling Moreover, the ‘lifestyling’ requirement is just plain silly and will cut potential returns for the last five years, almost a third of the duration. Perhaps a year or two could be justified, but this is like paying for a racehorse and then hobbling its legs for the last of three laps in case you fall off. You won’t win any races like that. As for the non-stakeholder child trust funds, ‘buyer beware’ applies. You will have to think carefully what product you require that cannot be offered within the stakeholder formula and a 1.5% annual charge. Reading the small print on charges could be particularly worthwhile. Stakeholder pension To really help a child, you can’t do better than start them a stakeholder pension. As described at the start of this piece, you get up to 65 years worth of compounding, and you get full tax relief on your contributions even if you are not related. That means the child gets £1 for every 78p you contribute, or in the case of high rate taxpayers for every 60p you contribute. Charges for plans are capped at 1%, which makes them better value than a Child Trust Fund account. Though only parents and legal guardians can open an account for the child, grandparents and others can contribute too. The stakeholder maximum limit is £3,600 per child per year, which in terms of net contributions is £2,808. See also: Simplifying your investments Sense and insensibility Perhaps one of the greatest attractions of a stakeholder to the donor is that the child cannot get their hands on the cash to waste it until they are at least 50. That certainly removes the folly of youth, though of course it bypasses the maturity of the middle years too. The spending will be crammed into the decades between sensible and insensible! That doesn’t mean that the growing adult will get no benefit before then. As a safety cushion, it will allow them to spend from their own earnings that would otherwise need to be saved for retirement. It may take decades before they realise it, but when they do, they will certainly raise a glass to your foresight and generosity

    Seven simple investment tricks

    Here are some easy money-making tricks for investors and savers We all want to make a bit of money and we don’t want to spend a lot of time doing it. Here are seven simple ways to get a bit more of a return on your savings and investment cash. 1) Invest long-term in bank shares not bank savings accounts A typical bank savings account will net you interest of 3.5% and the best will get you 5%. However, if you trust a particular bank with your money why not look at its shares instead? For example, Lloyds TSB’s best savings account offers interest of 4.75%, yet Lloyds-TSB dividends yield 6.8%. Bradford & Bingley Premium Saver offers an interest rate of 3.04%, but the shares yield 5.6%. Better still, bank share prices and dividends have risen decade by decade, whereas interest rates vary according to the economic cycle. 2) Look at Guaranteed Equity Bonds for a no-risk profit Heads you win, tails you don’t lose. This is the promise of Guaranteed Equity Bonds, which are stockmarket-related investments. Most of these bonds offer the best of the increase in value of shares, typically 90%-110% of the rise in the FTSE 100 index over five or so years, together with a promise of getting your money back if the index falls. For those who are nervous about the risk of shares, this offers the best of both worlds. The best known series are those offered by National Savings & Investments, though there isn’t one currently available. However, the Post Office has an issue available which offers 110% of any upside over five years. Applications have to be in before April 4. HSBC is offering one with a 115% return, which closes later in that month. Always read the application thoroughly to make sure your initial deposit is guaranteed, to make sure there are no charges, and to be sure that the money is placed with a suitably secure financial institution. These products are not suitable for early encashment. More about National Savings’ products 3) Use interest free credit wisely From time to time we all get offered interest-free credit, usually on a purchase. However, some credit-card companies have taken to offering huge advances to potential or existing customers with no interest to pay for six months. Now such an offer is a dangerous temptation to those who want to buy things they can’t afford, but is a golden opportunity for investors. You must pick a home for the cash that offers a clear return and make sure you get the cash back on time. The advance probably has to be £1,000 to be worth doing, probably more if you would need to apply for a new card. Here are some ideas: The simplest idea is merely to put the cash in a high-interest savings accounts, but make sure it pays interest at least monthly, rather than annually. If you have an offset mortgage, use the funds in that account to reduce the amount you pay in interest on your home loan. Buy Premium Bonds. The Financial Times described how Richard lander, Director of Citywire used a £19,000 interest-free six-month advance and made £400 in prizes, equivalent to an annual rate of 4.7%. Not bad, considering it was made on someone else’s money Best deals on credit cards 4) Invest through your pension From April next year you will be able to set up a self-invested personal pension (SIPP) even if you are already a member of an occupational scheme. Though pensions are complicated, and the details of this are no different, the investment trick couldn’t be more straightforward: tax relief means a basic rate taxpayer will be able to buy a £1 investment for just 78p of taxed earnings, and a high rate taxpayer gets the same for just 60p. There are plenty of low cost providers around who will set you up a basic scheme for £100 or less, with no annual fee and trading commissions around £10-£12. 5) Take out a cash Mini-ISA The no-brainer of the savings world, a cash Mini-ISA allows you to get interest paid gross, with no tax to pay on up to £3,000 a year of savings. This is suitable for money you intend to put away for a year or two because paying money back in after a withdrawal while count again against your annual deposit limit. Top Mini ISAs pay 5.5% interest or better. The best I could find was the Halifax at 5.7%. Compare rates on cash ISAs 6) Buy a low cost index tracker The stock market has, over the long term and with dividends re-invested, outperformed every other kind of investment. The easiest way for most of us to share in that growth is by purchasing a low-cost index tracker, a special kind of fund which takes a broad selection of shares which are representative of the economy. To make sure that you get the full benefits of the increasing value of those investments, you need to make sure that you are paying very low charges. The lowest funds charge as little as 0.35% a year to manage you cash, which means the vast bulk of your money is going into the market not into a fund manager’s pocket. 7) Re-invest dividends Dividends are often the cinderellas of the stock market. While everyone is crowding to buy the latest hot stock, they may not even bother to look at shares which offer a humble 3%-4% in dividend payouts. Yet the bedrock of all long-term stock market performance is the reinvested dividend. The Barclays Equity Gilt study shows that £100 invested in 1899 in a broad range of shares would be worth just £170 in real terms at the end of 2004, excluding dividends. Yet with full re-investment this would have soared to £18,875. By Nick Louth, MSN Money special correspondent

    Sunday, January 15, 2006

    Million Dollar Homepage Suffers DDoS Attack � MarketingVOX

    Once again, the million dollar homepage got all the attention from the public. It got DDos.!. Come on now, how many websites got DDoc attack everyday? I just can't take that idea. Anyway, Tew (the website owner) made 1,037,000 dollars so far from September. Amazing money! I gotta give him a lot of respect for that but still, one million dollar homepage is the most ridiculas idea ever!