Finance Plan Projections

[Desert Orchid]

Mrs O and I recently spoke to a bank adviser about long(ish)-term investments. Taking the results of our 'personality' test into account, she set up a plan that would put some of our money into 'safe' investments and some into slightly more risky ones.

Her projections were based on returns of 5%, 7% and 9% pa. She said this was the industry standard and what all advisers had to give to prospective clients.

I just wondered if even 5% was a bit optimistic in the current climate.

Anyone any ideas?

Should a 'cautious fund' be hit hard by the likes of the Dubai situation?

 

[clivex]

5% is on the optimistic side. It is hard to envisage growth rates of 7 or 9 % whilst interest rates remain so low and are likely to do so...

Any fund aiming for those two figures is more than likely to be stock market based and thus have the downside risk.

Stock markets are still probably a bit low though.

Dubai could have some knock on effect but equally could pass quickly enough. The sum involved is not that crucial.

 

[krizon]

I set up a bond for Mum with some of the leftover capital following the sale of her flat (to pay for her care home), Dessie. It was a 'with growth' longish-term one with AXA and is currently showing a 75% depreciation over the last year alone, and that was a cautious one, given that it was me investing my mater's moolah. When the small prints warn you that they can go down as well as up, they ain't kiddin'! Equities and bonds are beginning to show signs of a slight rise, so eventually it may claw its way back up a bit, but right now it's not worth me taking the money out, so that's the best I can hope for.

Depending on how much dosh you want to play with, you're better off buying a repo house at auction and flipping it. You'll pay a bit in capital gains when you sell, but not enough to see your profit margin unpleasantly impacted. Alternatively, buy a nice apartment to let out to professionals. Whatever you pay for it now will increase over time and you never know, if might even be what you want to move into yourselves when you hit that time of life when you want to downsize. You can let it direct yourselves, or put it with a reputable letting agent and insist they make check-ups on its condition. When I put letting properties with an agent who promised to do that, they failed. I was better off letting direct. There is a constant market for lettings, especially at the better end of the market. Your capital will be unlikely to devalue, while it could bring you in a very nice regular monthly income. Speak to an indepent financial advisor if you want to consider this option any further - a bank advisor will only sell you bank products, and they can change without them notifying you. For example, the AXA bond I took out is no longer a product Barclays offers - not that anyone phoned up to say would I like to switch to a better one, or even get out before it disappeared without a ripple?

 

[Tout Seul]

High target rates even for the long term. Take note of K's experience.

I for one am very wary of the current UK stock market levels. The funds are getting huge inflows of cash( cos interest rates are so low) and have to put it somewhere. Fundementally eqiuties are overvalued imo.

Haven't the time to give detailed thoughts but definitely identify and spread your risks.