And yet we, in the financial services industry, positively encourage our customers to develop bad habits.

Investment platforms, with ever shinier front ends, offer 24/7 access to view the value of our portfolios any time of day we wish. Well meaning financial advisers bombard their clients with “market updates” in a bid to show they are doing something.

All of which, overtly or surreptitiously, encourages the end investor to do the exact thing we counsel them not to do. Engage with their investments.

Let’s consider two investors, both invested in exactly the same way.

Colin (blue line) compulsively logs into his brokerage account every day. He notices every single (perfectly normal) day to day gyration of the market, and as the value of his investment grows these swings in value take an increasingly large emotional toll.

Helen (orange line) looks at her portfolio only once a year and therefore, by definition, enjoys a smoother investing journey. Not only that, but as she looks less frequently she is also likelier to see positive progress on the occasions she does so1.

Although Helen ends up in exactly the same place as Colin, she makes life so much easier for herself along the way.

I say again - there are no bonus points for difficulty in this game. It isn’t figure skating.

If financial services firms were trying to genuinely do right by the families we work with, we would actually be making investment platforms less functional and more difficult to engage with, rather than more shiny and tempting.

We would also offer less commentary on what is going on in the world day to day, focussing instead on what never changes. The timeless principles that have consistently helped folks in the past to realise the financial futures they want.

In other words, we would be looking to make investing easier. Not harder.

None of which is to say that I am a robot. Of course, I have been known to check the value of my pension at the bus stop the odd time.2 In much the same way as I have been known to overindulge at the hotel buffet.

But we must recognise that these habits do nothing but ultimately harm us in the long run.

If our main edge as retail investors is to exhibit the best behaviour we possibly can, then we must give ourselves the least possible chance of making a behavioural error.

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So, how often should we be looking?

In an ideal world, no more than once a year I’d say.

The below table shows the probability of a positive return from the global stock market (since the beginning of 1997) over one, three, six and twelve month periods.

If you’re invested solely in stocks3 and are checking the value of your portfolio monthly, based on this historical precedent you should expect to see a positive return over the month around 60% of the time. Not much better than a coin flip.

But when we instead consider annual periods of return, the probability of a positive outcome is higher - 75.8% of the time.

That might not seem like much of an improvement, but let’s say we have a ten year holding period just like Colin and Helen, the fictional investors who we met above. In one scenario, we check on the progress of our investments annually, and in the other we check the value every month.

When we check annually, based on historical averages, we should expect to be confronted with a disappointing return over the latest twelve month period two or three times out of ten.

But if we are checking monthly, we should prepare to see a negative monthly return on 47 occasions over those ten years.

We may be the best behaved investor in the world, but the more we look the more we raise the potential for catastrophic error. Each of those 47 times offer a temptation to jack it in, particularly when we might have had a bad nights’ sleep, or a row with someone we love, or a few too many drinks with our mates the night before.

It might sound trite, but the main weapon in our armoury as individual investors is our mindset. We must protect it at all costs.

If the prospect of only looking at the value of your investments once a year gives you the heebie jeebies - good! Getting better at things is meant to be difficult.

But if you can’t bear to move to an annual cadence, then moving to six or even three month observation windows to begin with will still make your journey feel much smoother.

Have a great weekend.

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Past performance is not indicative of future returns. None of the above is intended to represent advice to any individual. If you have any specific questions regarding your own situation, please consult with a regulated financial adviser.

Perhaps due to the seemingly endless reams of column inches devoted to the topic, a lot of families are coming to us with questions about how to best plan for passing assets onto the next generation efficiently. Not just from an Inheritance Tax perspective, but to ensure the right people get the right support at the right time.

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But it is a very sad fact of life that some of us will not get much warning before we arrive at the pearly gates. And it is another sad fact of life that a lot of people just do not get around to organising their estate for the next generation in time.

In these kind of situations, a Deed of Variation can offer a priceless legacy planning “safety net”.

A Deed of Variation is a legal document that allows a beneficiary of an estate to redirect some or all of their inheritance to someone else, after the deceased has died, without that redirection being treated as a gift from the beneficiary for tax purposes.

This opens up some interesting post-humous planning opportunities, and I’ll share some examples below. But first we need to answer…

What is required for a valid Deed of Variation?

For a Deed of Variation to “work” it must:

• Be executed within 2 years of death;

• Be in writing;

• Not result in any consideration being paid to a beneficiary; and

• Include the statutory election(s) for the relevant Inheritance Tax and Capital Gains Tax treatment to apply1.

I had previously been harbouring under the impression that a valid Deed of Variation requires all beneficiaries to agree to forgoe their respective entitlements.

This is not actually the case, and an individual beneficiary can choose to pass on their individual inheritance, rather than requiring every single beneficiary to sign the Deed. Thank you to Matt Pitcher at Altor Wealth for putting me right on this.

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When is this a good solution?

I have set out below some examples of where I have seen a Deed of Variation work nicely.

Skipping a generation

Let’s say elderly parent passes away and leaves their entire estate to their, now grown up, child. Said child is financially secure in and of themselves and already has a large Inheritance Tax liability that they are concerned about. Maybe they have also had some health issues into the bargain.

They can, if they wish, choose to vary the terms of the will so that the assets pass “down a generation” to their children immediately - either directly or via trust. This means that the potential for a double Inheritance Tax charge is reduced, and the money goes to the most needing of the family the quickest.

Protection for cohabiting partners

Current intestacy laws offer no protection for unmarried cohabiting partners. Which is mental in 2026, but that’s where we are.

What this means in practice is that if one of an unmarried couple passes away without a will, their partner (who they may have lived with for decades, and have kids with) stands to get none of their estate. Under current intestacy laws, the estate would instead pass to any children the deceased has, then their parents, then their siblings and so on.

So in this instance, a Deed of Variation can be used to post-houmously provide for the remaining partner in a relationship. The main practical snafu with a Deed of Variation in this kind of situation, is that a minor child cannot legally consent to giving up any entitlement bestowed upon them through a will or the intestacy process. This only works if the kids are over 18.

The charity hack

A simple, yet effective, bit of Inheritance Tax planning (that I weirdly rarely see in the wild) is that if 10% or more of an estate is left to charity - the Inheritance Tax rate applied to an estate is reduced from 40% to 36%.

This can throw up some opportunities for the beneficiaries of a large estate, particularly if a charitable gift can bring the “Residence Nil Rate Band”2 back into play.

These are just a couple, there are more. The key message from this week is that legacy planning doesn’t stop when the deceased departs this mortal coil.

Despite this, it should only really be used as a last resort. Having an up to date will that reflects your current wishes should be the top priority job.

Have a great weekend.

Inheritance Tax planning is coming up time and time again in the conversations I’ve been having recently. If you would like to book some time in to explore how you can pass assets onto the people and causes you care about, efficiently, then click the button below.

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None of the above is intended to represent advice to any individual. If you have any questions regarding your specific position, please get in touch with a regulated financial adviser.

Every day at the minute another email lands in my inbox telling me I’m a moron for not investing in some fancy alternative strategy, because bonds and equities have decided to start moving in the same direction.

And have a guess what the answer is? Some spivvy hedge fund that costs 2 and 20 to invest in and hasn’t moved in ten years. But just you wait.

There are a few reasons I’m so on board with just using bonds and stocks to construct portfolios:

1. It’s cheaper.

2. It’s simpler.

3. We have loads of data on the performance of this strategy, and it’s worked just fine historically (as we’ll see below today); and

4. MOST OF THE TIME EQUITIES WORK. Who cares what the bond/stock correlation looks like when the main driving force behind your returns (the stocks you own) are working!? You only need your bond allocation to dig you out, for the correlation to turn negative, when equities stop working.

   And the good news is that almost of the time bonds do just this1 - over the past 36 full calendar years, bonds and equities have only posted material losses together once, in 2022.

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But let’s humour the industry and go through a similar exercise to the one we went through last week.

I have compared the performance of a simple 60/40 strategy2 (in purple) during all of the same notable market drawdowns we looked at last week, to the performance of the Investment Association Mixed Investment 40-85% Shares (in orange) and IA Volatility Managed sectors (in turquoise).

The first Investment Association benchmark encompasses all funds available to UK investors, which have an equity content of between 40%-85%. Within these constraints however the managers of these funds can invest in any asset class or market where they see value. Both to generate returns and manage downside.

With the Volatility Managed sector the clue is in the title. These funds are run to a certain volatility target, their mandate is to generate strong risk adjusted returns relative a hokey old strategy like the 60/40.

So, let’s see how they got on.

2025 - Trump tariffs

Not bad.

2022 - Inflation sell-off

2020 - COVID crash

2018 - Taper tantrum

2011 - European debt crisis

2007 - Global Financial Crisis

2000 - Dot com crash3

Oh.

Now at this point you’re maybe shouting at the screen - “yes, but Dave, you’re being a sneaky beaky because the two Investment Association sectors probably had a higher stock content during these periods. Hence why they underperformed.”

OK. Fair point. So let’s look then at how each of these strategies performed over the past ten years4. A period which not only has been a great one for stocks, but also included the worst year in living memory for bonds (2022).

And not only that, but over the past ten years in order to generate this outperformance we can see that 60/40 has experienced almost exactly the same amount of annualised volatility (experienced as much risk) as the IA Volatility Managed sector, and exhibited less risk than the IA Mixed Investment 40%-85% Shares sector.

Have a great weekend.

If you would some help in simplifying your investment portfolio, that is very much my bag. You can book a call by clicking the button below.

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All of the above performance charts (with the exception of the first one) are supplied by our friends at FE Analytics.

Past performance is no guarantee of future returns. None of the above is intended to represent investment advice to any individual. If you have any questions regarding your specific circumstances, please consult a regulated financial adviser.

During one of these drawdowns, taking a “hands off” decision minimising approach can seem counter intuitive. Reckless even. The car feels like its skidding off the road - we need to grab the wheel!

And one of the promises of the active management industry1 is that through skilful management, a firm can protect its clients from the worst of this pain by nimbly making adjustments on the fly. An option not open to those silly little “passive”2 investors who have to eat the pain.

But it takes more than a shiny brochure and some marketing spiel to convince us over here - so let’s dig into the numbers.

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In each of the below charts, I have compared the performance of the global stock market3 (in blue) to the performance of the Investment Association (IA) Global sector4 (in red), during every notable drawdown since the year 2000.

The IA benchmark includes all of the funds available to UK investors with a global equity mandate (this includes index funds, but the sector is still composed mainly of “active” managers). If active management were able to better protect investors to the downside, we would expect to see outperformance for this sector during times of drawdown.

2025 - Trump tariffs

2022 - Inflation sell-off

2020 - COVID crash

2018 - Taper tantrum

2011 - European debt crisis

2007 - Global Financial Crisis

2000 - Dot com crash

So, in aggregate there is very little evidence that active management strategies, at least in the global equity space, do protect clients against the downside. So either way, we are going to have to eat the volatility - why not pay less to do so?

Of course, there will be individual funds that shot the lights out in terms of outperformance during each of these periods. I am not denying that. But based on a cold eyed, probabilistic assessment your chances of picking said funds lie somewhere between Bob Hope and No Hope.

What will actually save you during these dark times is not your portfolio strategy, nor your investment nous. It is your stomach.

Yes you should have a properly diversified, data-driven investing approach. Yes you should have a robust financial plan, with enough cash and low risk investments set aside so that you can leave your longer term investments alone during these inevitable periods of decline.

But ultimately it is our behaviour during such times that will determine the outcome we get. And the good news is that behaving well as an investor don’t cost a thing.

This week, in the interests of brevity I have only looked at the performance of active equity managers versus the broad market during times of drawdown.

Most folks approaching, or in retirement, will not be solely invested in stocks - and so next week I’ll be examining whether active fund managers with a flexible mandate add value relative to a simpler alternative during times of market turbulence.

Have a great weekend.

The marketing bods tell me I need to add a “call to action” or something similarly obnoxious to the end of these pieces.

So if you would like us to have a look at your portfolio through a data-driven lens, you can book a call by clicking the button below. Consider yourself pitched.

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Past performance is no guarantee of future returns. None of the above is intended to represent investment advice to any individual. If you have any questions regarding your specific circumstances, please consult a regulated financial adviser.

“ENSHITTIFICATION (noun) - Colloquial, the gradual deterioration of a service or product brought about by a reduction in the quality of service provided, typically as a consequence of profit-seeking.”

Macquarie Dictionary, 2024

As time goes by, our minds can play funny tricks on us.

Nostalgia is real, and we tend to remember the past as we wish to (often through rose tinted spectacles), rather than how it actually was.

But it seems to me like we are increasingly living in a time where the required standard is to do the bare minimum.

Maybe it is just because I’m becoming old and grumpy1, but not a day seems to pass recently where, as a consumer, I feel like I represent an inconvenience rather than an opportunity.

Phone’s ringing out, lack of responsiveness, deadlines slipping without communication, hidden charges. And in some cases just an outright inability to deliver the service paid for.

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The majority of us work in some kind of service profession. We have customers who we serve, in return for financial compensation of some kind. This exchange of value is what makes the modern world go round.

Even if we do not spend our days dealing with the general public, our day job will naturally involve the management of stakeholders of some kind. Bosses, our team, shareholders etc. etc. So getting, and keeping, people onside is a natural part of day to day life. It is a skill to be managed and nurtured like any other.

I’m aware that the art of “getting people onside” can sound a bit like manipulation, but in my experience all that is required to keep a stakeholder happy is to do the basics well.

Deliver what has been agreed, on time and be open and available to any queries. And do it consistently.

You don’t need to know everything, no-one does. “I don’t know” are three very powerful words, but the willing to go away and land upon a logical, well informed answer represents the bare minimum.

Most consumers are perfectly reasonable. There will always be some headcases, the kind who leave one star Google Reviews when the restaurant kitchen won’t make something especially for them - but that is life, you can’t please everyone. And nor should you want to.

But we should all endeavour to do our best. Yes we owe it to the customer, but we do our best primarily because we owe it to ourselves.

We have had a young man in on work experience this week. Good lad - turns up on time, listens, asks some questions and tries his best. That’s 90% of the job right there.

There has been plenty of ink spilt about how the AI revolution means that graduates are going to have it really difficult. Why hire a junior to, initially, undertake menial tasks when you can pay Claude a few quid a month to do it instead?

And of course there are lots of headwinds for young people2. But I’m actually going to take the other side.

From what I have seen, AI has made the average person lazier. A bull market in mediocrity.

When everyone sounds the same, we all sound the same. How dull.

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I’m sure some of you think I am daft in spending an hour or two writing these posts every week. Why spend this time and effort writing a blog every week when AI can churn one out in thirty seconds?

Well, because 90% of people will do the latter, and therefore there is a big opportunity for the rest of us to stick our heads out above the AI sludge. And also, y’know, because it’s a laugh.

The same applies across the working world. When most answers can be pulled instantly from a screen, the joy of the craft gets lost a wee bit.

And as everything becomes easier, doing difficult things becomes harder. So we don’t do it. The bar slips ever lower.

For the young and motivated person I think it is actually a great time to be coming into the working world for a couple reasons.

First off, if all of the boring, menial tasks become commoditised and dealt with by technology, you can get stuck into the more interesting stuff from day one.3

Second, as a young person your energy and enthusiasm are your superpower. It is infectious, and these attributes will catch the attention of exactly the sort of person you want to notice.

If standards are going to continue to slip, you don’t even need to go the extra mile anymore - the extra yard will do.

In a world that is increasingly beige, it is always easier to notice a splash of colour.

Have a great weekend.

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Honestly, how is it this bad? It is 2026 for goodness sake - can the robots not handle it all yet?

I promise this isn’t going to be a total moan-athon. Sarah and I moved into our new home last Friday, and we are delighted and feeling very fortunate. The warm and fuzzy feelings we are currently basking in go some way to eradicating the frustration of the past year and a half, but not all of it.

I feel getting through the whole thing is somewhat of a rite of passage. If you, or anyone you know, is about to embark on this endeavour - then it might be helpful to know a) what I think we did well; and b) what mistakes I think we made, so you can hopefully avoid some of the pitfalls.

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First up, the good stuff.

We saw loads of places…

You'll start off with a “wish list” of what you think is important to you, but the only way to really get a sense of what is realistic is to see as many places as possible. See everything you can - new homes and fixer uppers, smaller places and bigger places, in areas you are both familiar and unfamiliar with.

By doing this you’ll establish what really is important to you, which is particularly crucial when you are in a couple - because invariably the two of you will want to prioritise different things.

I am very lucky to have a partner who focusses on the practical stuff - side access, driveways, quiet roads. I, on the other hand, am a magpie - easily seduced by nice kitchen cabinets.

Seeing loads of places gives you a better idea of what trade offs you are willing to accept. It will also give you a flavour of what the market is like in your given area at that given time.

…and started early

We had property to sell, but almost as soon as this was on the market (and a little bit before truth be told) we started looking.

Some vendors will be sniffy about letting you have a look before you are “proceedable” i.e. have enough cash to buy the property, or have your property under offer. But those people need to get real.

Starting the process early also gives you a mental benchmark of what is out there more quickly.

Be realistic if you are selling

"Endowment bias” refers to the tendency for people to value something more highly simply because they own it, compared to how they'd value the identical thing if they didn't own it yet.1

Folk, therefore, consistently overvalue the home they live in. I get the sense this phenomenon is particularly common in London, where the average person who has owned their home for ten plus years think they are a property genius because the price has gone up a fair bit.

This is exacerbated by the fact that many agents, in a bid to get the listing, will “butter up” the vendor by giving them an over-valuation.

We found a lot of the prices we came across not to be based in reality. And those properties are, mostly, still sat on the market or have been pulled without offer.2

It helps to be organised

Sarah can take the credit for this, rather than me. If you are selling something, try to get all of the documentation for your property into a single binder, so that you can have everything in one place. Invaluable when people ask the most obscure questions about what material your balcony is constructed from.

From a buying standpoint - have a spreadsheet so you can compare the features of each property you see, when you see them (price, square footage, distance to nearest station etc etc). This will give you a decent, hopefully relatively objective record of everything you have seen and the trade offs.

We stuck to our budget…

The oldest trick in the estate agent’s book is to establish your budget, then show you stuff just above it.

This works because we see the slightly more expensive place and begin to imagine how great life would be there. It then becomes very difficult to “go backwards” and put an offer on the more sensible place, that by this point feels like a bit of a downgrade.

Try not to get sucked into this game - if you stretch yourself on the mortgage it could consume a lot of mental and emotional bandwidth in future. And mental and emotional bandwidth is quite important.

When it comes to making an offer, take your time as well - good decisions are made slowly. Maybe this is a function of the market in London at the moment, but we found we had plenty of time to decide before we made an offer on anything.

It is incredibly tempting when you see something you love, to jump in and try to get in ahead of anyone else. And estate agents are more than happy to play on this FOMO - they do, after all, work for the seller rather than the buyer and this is really important to bear in mind.

…but managed to futureproof ourselves

From a financial standpoint, what really knackers you when it comes to property, is the bid-offer spread3. The costs of transacting a sale and purchase are pretty material because of estate agent and solicitors’ fees, as well as stamp duty, so as a rule of thumb you want to try to minimise the amount of trades you do during your life.

I appreciate I am speaking out of both sides of my mouth here a bit, saying don’t stretch yourself but at the same time try to buy something you’d be happy in for at least ten years. There is a balance required for sure, but it is doable.

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And now, the things I don’t think we did so well.

Took people at their word

God, this is a depressing one.

It is pretty healthy to go through life assuming that most folks’ intentions are honourable. But there is something about this process that brings out the absolute worst in people. Everyone lies.

Lies about the position they are in, lies about why they are moving, lies about how much interest there has been, lies about their borrowing position.

We saw a place we really liked, and put an offer in. That offer was accepted, and we were told the property had been taken off the market pending confirmation of the sellers’ onward move.

But it hadn’t been taken off the market, and you can see where this is going. We got gazumped and it turned out our offer had been used as leverage to get a better price. I wasn’t a happy bunny.

Not particularly honourable - but these things happen. So it is probably a good idea to go into the process mentally prepared for the worst behaviour.

We got ahead of ourselves

We had a sale and purchase agreed in September last year, and immediately started planning what we would do with the new property when we got into it. Where the furniture would go, what room we would redecorate first - that kind of thing.

But the process ended up being dragged out for five full months, at which point it fell through. We were naturally very disappointed, but it would have been wise to remember that having an offer accepted is just the beginning. Don’t get too excited too early.

The whole process will probably take twice as long as you expect it to. Which brings me neatly onto…

Try not to scrimp on your conveyancing solicitor

If you can find a great conveyancing solicitor, use them. Even if they cost a bit more, they are worth their weight in gold.

We didn’t. And ours’ were, let’s politely say, crap.

As a client, if you are having to manage the process yourself it can turn into a massive time suck. Which isn’t really ideal because you probably have a day job to be getting on with and a life to lead.

If you have any hints or tips for those folks who are going through the process, I’d love if you left a comment below the line. I’m sure there is loads of stuff I missed.

Have a great weekend. I’m off to B&Q to buy a hedge trimmer.

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None of the above is intended to represent advice to any individual. If you have any questions regarding your individual situation, feel free to reach out to me at david@beechgrovefinancialplanning.co.uk or consult with any other regulated financial adviser.

The benefit, in and of itself, isn’t really going to move the needle. For tax year 2026/27 Child Benefit payments amount to £27.05 per week (£1,406.60 per year) in respect of an eldest child, and £17.90 a week (£930.80 per year) for every child thereafter. But every little helps I suppose.

There isn’t a limit either on the amount of children that the benefit can be claimed for so…have at it I guess.

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It is important to note however that while Child Benefit isn’t technically means tested, it is effectively “by the back door”. Any family where one of the couple earn more than £60,000 of “adjusted net income”1 will have to repay some or all of the Child Benefit they receive.

This clawback is unimaginatively named the “High Income Child Benefit Charge” and will either be calculated and claimed back by HMRC through the Self Assessment process, or as of recently, through automatic deduction from your pay cheque via the PAYE system.

The “High Income Child Benefit Charge” operates on a sliding scale, with 1% of the benefit lost per £200 of “adjusted net income” over £60,000. What this means is that if one of the relevant couple earns more than £80,000 in a year, any Child Benefit received will need to be repaid in full.

This, I would imagine, will catch a lot of you. So you might reasonably be thinking “why would I claim a benefit that I know our family is going to have to repay?”

And it is a reasonable question. The answer lies in what claiming Child Benefit triggers elsewhere in our tax system.

Any individual who successfully claims Child Benefit and who is caring for a child under 12, will automatically receive a Class 3 National Insurance (NI) contribution for that tax year. This matters because our National Insurance record is what is used to determine our personal entitlement to the State Pension.

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So let’s say we have a couple, one of whom earns £100,000 a year and the other has full time responsibility for looking after their new born. If the carer applies for Child Benefit and is successful, they will receive a year’s worth of State Pension (currently worth approximately £358 a year of inflation linked income from the age of 67) at zero cost.

Multiply this figure by 12 for all of the years this individual can claim for, and it sure does move the needle in retirement.

Our fictional couple of course fall foul of the “clawback” as the working partner earns more than £60k a year - however, when claiming Child Benefit there is an option on the relevant form2 to ask not to receive any payments, just to receive the Class 3 NI contribution.

The NI contribution is received by the individual making the claim, so it is super important that the claim is made in the name of the individual who isn’t working. This is because the “working partner” will receive a State Pension contribution automatically through their day job - so claiming in their name would be a waste of time.

Sounds great, how can I claim?

There are three options:

1. Claim via the HMRC app;

2. Go to gov.uk/child-benefit and start your application there; or

3. Fill in a form CH2 if you cannot apply online.

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Bugger, I should have been claiming for this but haven’t been…

Fear not! The government announced in April 2023 that it would introduce a new system allowing affected parents and carers to claim backdated National Insurance credits they had not previously claimed for free.

It had been due to launch in April 2026, but it has now been delayed to April 2027. So keep an eye out.

If you are due to receive State Pension before then, and think you are short of a few years you shouldn’t be, I would contact HMRC directly.

Have a great weekend.

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None of the above is intended to represent advice to any individual. If you have any questions regarding your specific situation please feel free to contact me at david@beechgrovefinancialplanning.co.uk, or contact another regulated financial adviser.

“I was the future once”.

David Cameron

Outside the heat is punishing - the kind that weighs heavy. Thirty five degrees and barely any shade.

But the NRG Stadium in Houston has the advantage of being the only one in the World Cup with air conditioning. And so within its walls lies an oasis.

All of which means that as Cristiano Ronaldo struts away from goal, looking better than any forty one year old has any right to do - he barely looks as if he has broken a sweat.

Noticing the approaching camera1, he fixes it with a steely glare. “I’m back!” he roars, straight down the pipe.

But then a little too quickly, almost as if he needs to convince himself as much as anyone else, he says it again. “I’m back…”

Now, at this stage we can debate to what extent anyone can ever really be “back” after notching twice against the footballing might of Uzbekistan.

But the more interesting questions to ask here, at least to me, are - “how can we realise when something isn’t working out anymore?” and, more practically, “when this happens to us, how can we exit stage right with dignity?”.

I don’t have a great memory, quite the opposite to be honest. But I do remember the first time I saw Cristiano Ronaldo play.

I was 15, we were staying in a rented house up near Portrush during the summer holidays, and my Grandad stuck on Match of the Day because we had heard some chat about this 18 year old with a terrible haircut who had just made his debut for Man United against Bolton.

I’ll never forget it, this boy came on and played with a freedom that was spellbinding. All tricks and flicks and stepovers and lollipops - he did things with a football that I had never seen before.

Ronaldo’s direct opponent that day was Nicky Hunt, a seasoned Premier League right back. Ronaldo made him look like a schoolboy who had won the opportunity to play in a competition.

It wasn’t just Hunt either. None of the Bolton players could get near him. They were 1-0 down when Ronaldo came on, by the time the game finished it was four.

Alas, that was then and this is now.

There have been a number of narratives around this particular World Cup. Too many teams, too high prices, FIFA managing to demonstrate a simultaneous disregard for both the paying customer and the environment - Balugon-gate.

But the most compelling narrative to me is how Cristiano Ronaldo has managed to sacrifice his entire country’s World Cup dreams on the altar of his own narcissism.

Portugal have a very good team. Vitinha makes the best club side in Europe tick. Bruno Fernandes at times seems to drag the lifeless corpse of Manchester United over the finish line single-handedly. Portugal have a decent spine, promising young players and a competent manager.

But in Ronaldo they have a luxury they cannot continue to carry. He is now a shadow of his former self.

No one can doubt Ronaldo’s dedication to his craft. It is impossible to be playing top level sport at the age of 41 without superhuman discipline. I’m 38, and getting out of bed in the morning can occasionally present logistical difficulties.

But he is forty one, father time is undefeated and the right time to hang it up increasingly appears to have been a couple of years ago.

Surely the mature thing to do would have been to retire before the World Cup, or at least accept a supporting role during the tournament - rather than be indulged like this. Playing almost every minute of every Portugal game, wandering about at centre forward like a particularly ambitious care home resident who has managed to escape into the car park.

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The end comes for us all some day. Not just that one, but lots of little endings throughout life. Some of these are obvious in real time, some less so.

We are told so often to persist, to keep going: effort = outcome. But what happens when the return is no longer worth our invested effort. When our time could be better suited in some other endeavour, on some other thing? And how can we know?

The bad news is that the desire to persist with some activity or decision, despite this no longer being the objectively “right call”, is a bias which seems to be hard wired into us2. Interestingly enough, not only is this behaviour ingrained into us humans - but it also seems to be present in other species too3.

The good news is that there are some practical steps that we can take to protect against this “sunk cost fallacy”.

When faced with a big decision whether to continue with some endeavour or instead stop, ask yourself honestly - “if I was coming to this question today, without any psychological scar tissue, what would I decide?”. Then literally get a piece of paper and write down the pros and cons - past effort isn’t allowed to be included as a vote for sticking with it.

The other interesting thing that the research shows is that older and/or more experienced folks seem better able to defend against this particular bias4. So if you don’t personally have the “mental reps” under your belt to see where you might be mis-stepping, you would be well advised to seek informal or professional counsel from someone with a few more miles on the clock.

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I’m no philosopher - you must know that by now. But I reckon the best lesson to take from the Ronaldo affair is to not tie too much of our self worth up in any one aspect of our lives. Not on our career, not on our net worth, not on the decisions we make.

The only thing that doesn’t have an expiry date in life, is trying to be a good person and to foster our closest relationships the best we can.

Everything else is transient, and we have to remain detached enough from the stuff that doesn’t really matter to know when the final credits are starting to roll on that particular part of our lives. If instead we tie up too much of ourselves in one aspect of our personality, we get too close to be able to see the full picture.

When the time comes, and it comes for almost everything, sometimes the greatest kindness we can afford ourselves is to draw a line and move on with gratitude.

Persistence may be futile, but hey - maybe the real prize was the friends we made along the way.

Have a lovely weekend.

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None of the above is intended to represent advice to any individual. If you have questions related to your specific situation, feel free to contact me at david@beechgrovefinancialplanning.co.uk or consult with another regulated financial adviser.

“A body at rest remains at rest, and a body in motion continues moving at a constant speed in a straight line, unless acted upon by a net external force.”

Sir Isaac Newton’s first law of motion there, and a personal favourite1.

To paraphrase, nothing changes if nothing changes. Inertia is the default setting for all things.

As we move through life we get into the habit of doing things in a certain way. Sometimes the weight of these practices can prevent us from moving forwards.

We may stay in a job, or a relationship, or a friendship, or a part of the world that no longer really serves us - but after a certain point in time it just becomes too difficult to change. And the uncertainty involved in moving, makes it infinitely easier to remain inert.

One of the challenges of this life of ours’ is that we can never know in real-time whether we are making a “good” or a “bad” decision for ourselves and those around us.

Even more confusingly, a good long term decision can feel like a bad one in the short term, and vice versa.

There are countless inspirational examples of people making huge changes to their lives that worked out amazingly well.

Vera Wang was a figure skater then journalist. But when she designed her first wedding dress at the age of 40, it was the trigger for her building a worldwide fashion house.

Ray Kroc2 sold “multi-mixer milkshake machines” for seventeen years before a chance encounter at the age of 52 led him to establish the first McDonald’s franchise.

Ronald Regan was a Hollywood actor, who pivoted into politics and casually ended up becoming the 40th President of the United States.

But there are just as many, if not many more, examples of people ripping it up to start again - where it didn’t work out for the best. That is life and that is just the chance we take.

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The parallels with money I think are obvious. We can get “stuck” in certain habits, in thinking a certain way about money - some of these may serve us well, some may not.

What is interesting however, is that Newton also discovered that inertia becomes more powerful with mass. It takes a heck of a lot of effort to move a boulder compared to a ball.

The more successful we become financially, the more those little tokens build up over time, the more we can convince ourselves we have it cracked.

So even if a sensible, well meaning person comes along with sensible, well meaning counsel as to how we might improve our position - our natural reaction may be to full the shutters down. “That’s all great, but the way I’ve been doing it has worked just fine for me to date thanks”.

This is the adviser’s challenge. Making even minor amendments to someone’s ingrained biases and behaviours can take a lot of time and effort.

But it can be done. I always think that if any of us are trying to make changes to some aspect of our lives, it is best to start with the easy wins.

Dave Ramsay is a personal finance expert in the US, with a large following. I may not agree with all of his ideas, but one strategy I think that neatly demonstrates the power of easy wins is his “debt snowball” strategy.

If someone has built up debt across a number of credit cards, the right financial answer - the one that makes the most “spreadsheet sense”, is to pay off the card with the highest interest rate first.

Instead, Ramsay recommends that people prioritise paying off the card with the lowest balance first.

Getting this balance cleared takes comparatively less effort than tackling “the big problem” straight out of the gate, but when that first balance is cleared it creates a disproportionately high dopamine response because we have got one card cleared. The boulder is beginning to roll, slowly admittedly, but it is moving.

One strategy from my own playbook I wheel out the odd time, is when someone is not particularly used to regularly saving/investing - we start small.

In the same way you wouldn’t expect someone to dander into a gym and immediately start bench pressing their own body weight, the “savings muscle” needs time to develop and grow.

Establish the habit, enjoy the benefit and joy of progression. Give yourself somewhere to go.

If nothing changes, nothing changes. You’ll be amazed what can happen as a result of a gentle shove.

Have a great weekend. I’m off to America for the next ten days for a family friend’s wedding, but also to take in the delights of FIFA’s big festival of capitalism. I’ll report back next Thursday.

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None of the above is intended to represent advice to any individual. If you have any questions regarding your specific situation, please either drop me an email at david@beechgrovefinancialplanning.co.uk, or consult with another regulated financial adviser.

1. Want to do well; and

2. Want to do good.

I just don’t think the majority of folk view life as a “zero sum game”. That for every winner, there must be a loser.

Obviously, there are those that do think this way - that is the way the world works unfortunately. And there is a special place for those individuals.

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One of the best things about money is that we can deploy it in any which way we choose. There is no right answer.

Use it to support people and causes you care deeply about, blow it all on a Lamborghini - or maybe just go to a World Cup game and try to buy a beer.

These aren’t either/or activities by the way. I absolutely believe people should use their money to provide themselves with maximum utility. That could mean creating experiences that generate life-long memories, both for ourselves and others. Maybe for others we have never even met.

But the well-intentioned person may wish to go further than this. They may feel they have a duty to invest their hard-earned in a way which they feel aligns with their personal values, focussing on investment opportunities that “do good” while avoiding companies that exhibit the sort of characteristics that they feel represent the worst of capitalism.

These feelings are entirely understandable. Although there has never been a greater time to be alive than today, the “system” does have its downsides. The kind of extreme wealth we see in a handful of individuals is ultimately not a great look for society.

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I’ll declare my interest from the get go. From a professional standpoint I see myself as having a duty of care to get the client to get the best financial outcome they can. Full stop.

This being the case, the next logical next step is to re-examine my own personal investing principles - the ones that jump out to me in this context are:

1. “Diversification is a must”;

2. “Keep costs low”; and

3. “Minimise decisions”.

Taking each of these in turn…

Diversification is a must

The typical ethical/sustainable1 portfolio will overweight allocations to “good” stocks and underweight or exclude allocations to “bad” ones.

From the end of 2019, the MSCI ACWI ESG2 Leaders index has underperformed the broad global equity index (as defined by the MSCI ACWI). But it is a close run thing and there have been plenty of periods where the ESG index has been ahead.

Nonetheless we must always be aware, that any time we exclude anything from our investment strategy we reduce diversification - increasing both the risk inherent in our portfolio and the chances that we will hold the future winners of tomorrow.

Keep costs low

Great strides have been made in the past few years to bring costs of sustainable index tracking strategies more in line with their “standard” counterparts, primarily as ESG equivalents have grown and achieved more scale. But there is still often a modest premium.

And it is sensible to assume that the more nuance (complication) we introduce to our investment strategy, the more we should expect costs to rise. And cost is one of the few things we can control when we invest - so we should keep a keen eye on it.

In 2021 there was a flood of supply of ESG products onto the market. This was post COVID, a time of heightened social awareness and a rampant stock market powered by the kind of “new economy” companies which scored highly on an ESG screen.

The ducks were quacking, and the investment industry was more than happy to feed them.

But then, as markets have a habit of doing, the trend completely reversed. In 2022 the best performers were energy (oil) stocks - the kind of holdings which score very low on a sustainability assessment. The average ethical strategy underperformed materially.

We need to have our eyes open from the get go that this can happen.

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Minimise Decisions

This is kind of the big one I think. A few weeks ago, we talked about how decision fatigue can create its own tax on returns and once we decide we would like to adjust our investments to take account of our own personal values - we enter into a minefield of decisions.

• What is it I actually believe?

• How strict do I want my self-imposed rules to be?

• How much extra am I prepared to pay?

• If these restrictions lead to underperformance or create more risk, will I be able to stick with this strategy?

• Can I even afford to go down this road?

Here’s another interesting question we have to ask ourselves. What makes a company inherently good or bad?

Companies are inanimate shells, surely then they can be neither good nor bad.

All a company can be is a vehicle for the individuals that comprise them. So the question then would seem to be - are these people good or bad, which is a whole other kettle of eels.

A quick look at the top holdings within some of the highest profile ESG indices demonstrates the difficulties there can be in making such assessments.

Above are the top ten holdings in the iShares MSCI World ESG Screened ETF. I’m sure all of us would have some serious questions about the ethics of some of the companies on that list. We could legitimately question them all in some way!

Where I’ve landed on this I think3, is that the best way for us to do good is to ensure we do it on a granular level.

Do the right thing in our day to day lives, be the kind of person we would want to encounter - and support the causes we feel most passionately about as directly as possible through charitable giving, “impact investing” or similar philanthropic endeavours.

I can understand why people would like their investment portfolio to mirror their values, I really do - but I think that doing so leaves too much to chance. For what else is investing than outsourcing our capital to companies and institutions and letting them get on with it? We may not always agree with how this money is used, but that is kind of the deal we make.

Better to my mind to leave your money doing its thing, and ensure it is spent in whatever you feel is the “right way” when the time comes.

You may disagree, I’m sure you do! As ever I’d love to hear what you think below the line.

Have a great weekend.

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Past performance is not indicative of future returns. These are my own personal views, and none of the above is intended to represent advice to any individual. If you have questions regarding your specific situation - feel free to contact me at david@beechgrovefinancialplanning.co.uk, or another regulated financial adviser.

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Today, we are going to be looking at the former.

Perhaps unsurprisingly, given how we are all living longer on average and how expensive DB pensions are to cover - the UK market has materially moved toward DC structures over the past couple of decades.

By 2024, only 1 in 3 employees were members of Defined Benefit pension schemes, the rest were all in DC. And DB members are overwhelmingly concentrated within the public sector - government workers, teachers, police etc. The private sector have largely binned these schemes off due to the cost.

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The first thing to say, is that a Defined Benefit pension offers an extremely valuable benefit.

Once you reach “Normal Retirement Age”1 whoever is on the other end of the pension will pay a set income, often linked to inflation, for the rest of your life.

Let’s say you stand to receive a DB pension worth £20,000 a year from the age of 67. This is also the age where the State Pension kicks in, and so from that point you will be able to receive £32,548 in gross of tax annual income every year until the day you die.

No looking at markets, no worrying about running out, the money lands in your bank account every month like clockwork. A healthy level of income coming in that will act as the foundation of your retirement funding, which you can top up using any other savings for the fun stuff.

Now the word “gross” above is doing a bit of heavy lifting, because income from a DB pension is taxable at “non-savings” income rates - 20% for a Basic Rate Taxpayer, 40% for Higher and 45% for Additional Rate in England, Wales and Northern Ireland.

However, tax on DB pensions is collected through the same “Pay As Your Earn” system that we all pay tax automatically through when we are employed. And if you are receiving the State Pension at the same time, the tax code applied to your DB income will often change to reflect the tax due on your State Pension income (because the State Pension is always paid without tax being deducted first).

I know, it can be a bit confusing.

How much will I get?

The amount of income paid out will depend on a number of factors, the main ones being - how long you worked for the relevant employer, when you choose to retire and what type of Defined Benefit scheme you are in.

The main two types of DB pension are:

1. Final salary schemes. Your pension is based on your salary at or close to retirement multiplied by your years of service in the job and an accrual rate (e.g. 1/60th or 1/80th per year). These schemes reward long service and rising pay, since the whole pension is pegged to your end-of-career salary. These are less common now as they are typically more generous.

2. Career average schemes (CARE schemes). Your pension builds up as a slice of each year’s salary, and each slice is revalued (uprated for inflation, often plus a margin) until retirement. The slices are then added together when you retire. This has become the dominant DB model, especially after public sector schemes were reformed from final salary to CARE in 2014/2015.

Each year while you are working, your pension administrator will write to you with a projection of what you currently stand to receive as an income on retirement. So you can have an idea of where you are at in real-time.

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Regardless of what type of DB pension you are in, these arrangements will often also pay a guaranteed income to your spouse or children if you were to pre-decease them while drawing your pension, and a lump sum if you pass away while in the job.

Sounds great. What do I need to do?

Very little if you don’t want to. While you are working, “standard” contributions into these schemes are handled automatically by your employer.

If you want to “buy more pension” - many schemes (especially public sector ones) let you pay additional contributions to purchase a set amount of extra annual income in retirement.

Most DB schemes also offer what is called an “Additional Voluntary Contribution” (AVC) arrangement - you pay into a separate “Defined Contribution” pension pot to be invested alongside your Defined Benefit pension.

If you want to, you can also choose to make additional contributions into a separate personal pension if you wish.

The key “watch out” here is that any contributions you make into either a Defined Benefit or Defined Contribution pension are subject to the “annual pension contribution allowance” - the cap on what you can put into pensions during the course of a tax year and still receive Income Tax relief2. If you exceed this amount, you will be stung with a tax charge. Which isn’t ideal.

For Defined Contribution pension contributions the relevant amount for the calculation of this “annual allowance” is very easy to discern - it is the amount which goes into your pension during the course of the tax year, after any tax relief has been added.

Sadly for Defined Benefit pensions, this figure is less clear - it’s the growth in the capital value of your benefits over the tax year, which is primarily driven by inflation.

Because we cannot know in advance what inflation will be, we cannot exactly know how much will have been deemed to have been added to your pension during the relevant tax year. In effect, we are trying to hit a moving target when it comes to making contributions.

What about at retirement?

As you get closer to your “normal retirement age” your pension administrator will once again write to you with a breakdown of your options. So from a practical perspective it is super important you keep your address up to date with them.

The two main decisions you have to make at this point are:

1. When do I start taking my pension?: If you decide to take your pension before or after the “normal retirement age”, you will receive a lower or higher income. How much the income varies by will depend on the “early and late retirement factors” applied by the scheme.

   Early retirement factor: take your pension early and it’s reduced, because the income has to be paid for longer - typically by around 4–5% per year, and the cut is permanent i.e. you will receive the reduced amount for the rest of your life.

   Late retirement factor: take it late and it’s increased, because the scheme only has to fund your income for a shorter period of time.

2. How much “tax free cash” do I want?: This is the other big decision to make. Most schemes will allow you to exchange some of your lifetime income for a tax free lump sum, to do with what you wish immediately.

   Now giving up any amount of income for life is a big decision, so it is important to think carefully before doing this. The question is complicated somewhat by the amount of tax free cash you get for giving up £1 of lifetime income (referred to as the “commutation factor” in the lingo) varying from scheme to scheme.

   A “good” commutation factor is generally thought of as being anything more than 20 - i.e. giving up £1 of income gets you £20 of tax free cash. But there is no “one size fits all” answer here.

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Is there anything else to be aware of?

A couple things, yes.

As I have mentioned above, supporting a Defined Benefit pension scheme is expensive. As a consequence, a lot of public sector pensions (e.g. the Teachers’ Pension, Civil Service and NHS pensions) are unfunded.

What this means is that the income which is paid out to retirees is not funded from a big pool of existing money, but from contributions from current employees3. Gulp.

The major exception to this is the Local Government Pension Scheme, which is entirely funded - gold star for them. Private sector DB schemes also have to be fully funded by law.

Despite this, things can occasionally go wrong. If a private sector DB pension scheme is unable to pay its liabilities, the “Pension Protection Fund” will step in and pay (less generous) benefits to those unlucky affected members of the defunct pension scheme.

The final thing to say is that it is possible to transfer your Defined Benefit pension into a Defined Contribution pension, should you so wish.

However, this is an extremely important decision with potentially very high downside and if you want to do this you will have to take advice from a specialist regulated financial adviser. There have been a number of unscrupulous advisers acting in this space historically so please, please be careful if this is a road you want to go down.

Crikey. That was a lot this week. Have a great weekend.

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None of the above is intended to represent advice to any individual. If you have any queries regarding your situation, feel free to contact me at david@beechgrovefinancialplanning.co.uk or consult with another regulated financial adviser.

Beechgrove Financial Planning is a trading style of Sylva Financial Planning (FCA number 523565). Sylva Financial Planning are not regulated to provide advice on the transfer of Defined Benefit pension schemes.

This is not one of those weeks.

If the word on the street is to be believed, Space X will begin trading on the stock exchange tomorrow. At a slated price of $135 a share the offering seeks to raise a casual $75 billion - smashing the previous record for an Initial Public Offering (IPO).

This $75 billion will be in exchange for just 4% of Space X - give or take. If the shares are floated at $135 a piece, it would value the company at around $1.75 trillion.

Huge, mind blowing numbers. But let’s rewind for a sec.

What is an IPO?

An “initial public offering” is when a private company sells shares to the public for the first time, listing on a stock exchange so normal Joes like you and I can buy and sell them.

Before an IPO, ownership of the company is restricted to founders, employees, and private investors. After it, the company is “public” and anyone can own a piece. SpaceX has been privately held since 2002, tomorrow will be the first time the shares trade on the stock market as we all think of it.

Companies choose to “float” on public exchanges for two reasons: to raise capital, and to let early backers and employees cash out.

When a company decides to have an IPO they will hire investment banks to value it, set an offer price and line up buyers for the shares.

On listing day those shares start trading, with the hope that the shares go up (or “pop”) on day one so the early backers can get out at a nice price.

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Why Now?

When companies list on a public exchange they want to see their shares go up, that much is obvious. So it makes sense to float in a strong market environment.

During a rough year for stocks in 2022, IPO activity fell off a cliff - only rebounding back to “normal” levels in 2025.

So far 2026 has been a great year for equity investors. And so it is probably no surprise that we are now seeing huge fund raises - not just from Space X, but if reports are to be believe Anthropic (Claude) and Open AI (Chat GPT) are looking to list this year as well. These would be monster issuances.

Already established companies are also choosing to raise money from investors at this point in the cycle too - Google announced last week they had raised $80 billion in a private placement to fund the building of AI compute infrastructure (this is a consistent theme at the moment).

All this money has to come from somewhere. Just taking Space X alone, $75 billion is a huge amount of supply for the market to absorb.

Just the amount that Space X are raising is enough to buy AirBnB in its entirety and have some change left over. It is approximately the same amount of money that we in the UK spend on defence each year.

Slapping a total valuation of $1.75 trillion on Space X would make it, overnight, the eighth biggest company on the planet. Bigger than Tesla, bigger than Meta.

Sharper minds than mine have looked at whether such a valuation is justified. Executive summary - it can’t be based on its current performance.

The company doesn’t currently make a profit, but this doesn’t mean the share price can’t go up. By investing in Space X you aren’t buying today’s reality, you are investing in the promise of a pipedream.

Put another way, at this stage whether the share price goes up or not depends entirely on vibes, not valuation.

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How have investors in IPO’s done historically?

Research consistently demonstrates that while IPOs usually experience a share price “pop” on their first day of trading - longer term most IPOs go on to underperform the broad market.

Jay Ritter is the “go to” academic on the performance of IPO’s. His study of 1,497 public listings from 2012 to 2021 showed that on average IPO’s underperformed the broad market by an average of 21.6% over three years.

Our chums at Dimensional had similar findings. From 1992 to 2018, a basket of Initial Public Offerings both materially underperformed the Russell small and mid cap indices, and experienced higher volatility into the bargain.

Nasdaq’s study of the performance of IPO’s from 2010-2020 showed that three years after their IPO, almost two-thirds of IPO stocks were underperforming their index market, with most (64%) more than 10% behind the market’s returns.

Now, the reason this last study is particularly interesting is because Nasdaq have bent over backwards to get Space X to list on their exchange.

In what I am sure is a total coincidence, Nasdaq have recently announced that they will allow certain companies to “fast track” inclusion into the Nasdaq 100 index after listing. Until very recently it would take a minimum of three months before a stock was included within this index, to allow the share price to settle down post float. Now, a company can be included after only 15 days.

This is important because there are hundreds of billions of dollars in index funds tracking the Nasdaq indices. None of which can be used to buy Space X shares without Nasdaq first including it in their index.

So far S&P, who provide the other main indices in America are not changing their rules to get SpaceX into the indices faster. It will take at least a year post-listing before the stock is included within the S&P 500.

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Does any of this matter to me if I just by index funds?

On the surface, no not really. But it depends on what index you are buying.

The below estimates depend greatly on the performance of the stock before its inclusion within the relevant index - so the numbers will invariably be a bit out. But you’ll understand what I’m getting at.

So to the properly diversified investor, Space X is a rounding error. The MSCI All Country World Index is a properly diversified global index and Space X is just immaterial. If the stock gets cut in half no-one will notice.

The more existential problem for those of us invested in the global markets as a whole, is what happens if the cumulative effect of all of these listings means that supply overwhelms demand.

As I mentioned above the money to support these listings needs to come from somewhere, and that somewhere is likely to be other stocks.

In the short term, all that really drives share prices is the balance between buyers and sellers. If there are more sellers than buyers, prices fall.

And maybe that’s what happens here. Maybe supply overwhelms demand to the point that markets correct. Maybe investors find the money down the back of the sofa and the party continues. We’ll have to wait and see.

Overall, you still only have one job really. Always be ready for a pullback, so you aren’t surprised when one comes.

Have a great weekend.

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Past performance is not indicative of future returns. None of the above is intended to represent investment advice to any individual. If you have any questions about your specific situation, feel free to drop me a line at david@beechgrovefinancialplanning.co.uk or consult with another regulated financial adviser.

There are now 560 odd folks who receive these emails every week - which is pretty cool.

However, if your inbox is anything like mine you will be bombarded by emails on a daily basis and this can become pretty tedious. As such, if you would prefer not to receive “The Money Den” each week you can find the button to “unsubscribe” at the foot of this email.

I’d hate to lose you of course, but I think it is only fair to point this out periodically as this button can be a little hard to find if you don’t know where to look.

Nice one.

Let’s, for a moment, imagine two hypothetical investors - Bill and Bob.

Bill invests into a concentrated portfolio of twenty individual stocks. His “best ideas”.

Bob instead invests in a single fund which captures the entirety of the stock market.

One morning, Bill wakes up to the news that one of the companies in his portfolio has announced a “profit warning”1. The stock is down 30% at the market open in the blink of an eye.

When he finds this out, Bill has a number of really quite important questions to ask himself:

1. Is this a temporary problem, or is the underlying business now permanently impaired?

2. Given this news has come “out of the blue” does he still believe in the management of this company?

3. How well have management explained the reasons for the miss?

4. Is this problem specific to this individual company, or is it part of a sector wide slowdown?

5. If it is a sector wide slowdown, are these problems confined to this particular sector or a result of a slowdown in the wider economy?

6. Has the market properly discounted this new news, or has it over or under-reacted?

7. How can he be sure of this?

8. Is this the last of the bad news, or could there be more to come?

9. Is Bill’s original rationale for investing in the company still in place, or does this warning change things?

10. Does he sell the stock?

11. Does he buy more?

12. If he sells the stock, what are the tax consequences - if any?

13. If he sells the stock, does he reinvest the money?

14. If so, what does he buy?

15. What costs and charges are involved in placing these trades?

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That is quite a lot to have to digest over your morning latte.

Bob, by contrast, doesn’t even notice this has happened. The only decision he needs to make is whether to buy a regular croissant or an almond croissant.2

In 2011, a flagship study of over 1,100 parole hearings in Israel3 showed that judges were much more likely to grant parole to an offender in the morning, than they were later in the day.

At the start of a judicial session, parole was granted approximately 70% of the time - but in the afternoon, the decision to grant parole was taken only 10% of the time. Which is a big difference.

As the day wore on, the accumulated effort of making all of these decisions meant that these judges seemingly stopped reviewing each case based on its objective merits and instead increasingly reverted to making the “lower stakes” decision - which was to deny parole.

Put another way, as the judges got tired they started making worse decisions on average.

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For us, as investors, there is a very simple way to avoid this kind of decision fatigue. Make fewer decisions.

Bill could be the most informed investor on the planet, a real Warren Buffet 2.0, but past research has shown that even the best hedge fund managers in the world only make the “right” decision 49.6% of the time4. Worse than a coin flip.

Barack Obama, a bloke who knows a thing or two about making high stakes decisions, told Vanity Fair in 2012 “You'll see I only wear grey or blue suits. I'm trying to pare down decisions. I don't want to make decisions about what I'm eating or wearing. Because I have too many other decisions to make.”

I’m sure old Barack, being a fashionable gent, would have liked to have been more ambitious sartorially. But he realised that he only had a certain level of decision making bandwidth available to him, and therefore decided to conserve this for the stuff that was absolutely necessary.

Bob has taken a leaf out of Barack’s book. His investing approach is the financial equivalent of a grey suit - leaving him to focus on the stuff that really moves the dial. Like breakfast.

Have a lovely weekend.

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None of the above is intended to represent investment advice. If you have specific queries regarding your individual situation, feel free to email me at david@beechgrovefinancialplanning.co.uk, or consult with a regulated financial adviser.

Say you are married or in a civil partnership. One of you is a Basic Rate Income Taxpayer (earning between £12,570 and £50,270 a year) - the other earns less than £12,570 (which is the current tax free “personal allowance”).

The partner that earns less than £12,570 can transfer up to 10% of their un-used personal allowance (£1,257) to the other, reducing the recipient’s tax bill by up to £251 a year.

If you are only just hearing about this for the first time, and have been in this position as a couple for several years - you can make a claim to the Revenue and backdate it for up to four tax years, meaning a couple could pocket around £1,000 in one go from HMRC. Tidy.

The “one off” £29,000 ISA allowance

Up to the age of 18, every youngster has a £9,000 annual Junior ISA allowance available to grow that money tax free. However, during the tax year (April 6th to April 5th) that little Johnny turns 18, he is also entitled to the £20,000 full adult’s ISA allowance from the date he blows the candles out and makes a mess of himself after necking a bottle of White Lightning.

In effect then, for one tax year only, a 17/18 year old (the bank of Mum and Dad) can get up to £29,000 into a tax free account.

The “extra” £20,000 needs to land in the ISA account before the end of the tax year - so parents of kids who turn 18 at the end of March or the very start of April need to be really on the ball.

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The Trading Allowance

Income generated from casual self employment of up to £1,000 is tax free and need not be reported to HMRC.

So if you are flogging used clothes on Vinted or old lamps on Ebay, and the income generated is under £1,000 a year - there is no need to fill out a tax return or pay any tax.

Claiming Brought Forward Losses

This one really can move the dial. If you sell an asset (not in an ISA or a pension or a bond), any gain on that asset above £3,000 of profit is subject to Capital Gains Tax at a rate of either 18% or 24%.

If you make a loss instead however, while not ideal all is not lost. For you can offset this loss against future capital gains - as long as you notify HMRC of the loss realised within four tax years of the end of the tax year where the loss was made.

An example:

Our fictional client invested £100,000 into a company in March 2021. The stock does poorly and she sells it for £50,000 in March 2023.

At the same time in March 2021 she invests £100,000 into another stock which doubles, and she sells that one for a £100,000 profit in May 2026.

Normally, this profitable sale would give rise to a Capital Gains Tax liability of £23,280.1

But as this diligent individual had already notified HMRC of the loss made in 2023, her Capital Gains Tax bill is only £11,280 as she is able to offset the £50,000 loss against the gain.

As long as the Revenue are notified in time, losses can be carried forward in perpetuity. There is no time limit for when you have to use them by. And such losses could be particularly handy in a world where future Capital Gains Tax rates go up by a lot.

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“Rent-a-Room”

The artist also known in some quarters as the Lodgers’ Allowance.

If you own your own home, you can earn up to £7,500 per year tax-free by renting out a furnished room to anyone.

There are two “watch outs” with this one - first off, many residential mortgages prohibit sub-letting without the lender’s consent. Taking in a lodger without checking the terms of your mortgage could technically put you in breach.

Secondly, if you use part of your home exclusively for commercial purposes, you can lose a proportionate slice of your Principal Private Residence (PPR) relief2 when you come to sell. However, a lodger who shares the living space with you (eating together, using communal rooms) is generally not treated as exclusive commercial use, so PPR relief is typically preserved. But if you’ve effectively partitioned off a self-contained flat, you could have a problem.

Let me know how you get on. Have a great weekend.

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None of the above is intended to represent advice to any individual. If you have any questions regarding your specific situation, feel free to contact me at david@beechgrovefinancialplanning.co.uk - or consult with any other regulated financial adviser.

Luckily that maladjusted young whippersnapper is no more. A few more grey hairs and I no longer offer to make the tea.

Since I’ve been in the job, the global stock market has done this.

A 5x return. Not bad.

But don’t let that chart fool you, along the way we have had to contend with plenty - the Eurozone debt crisis, wars, trade wars, Brexit, Trump, tariffs, COVID, negative oil prices and the Federal Reserve’s fastest rate hiking cycle in history.

There have been some big, ugly sell offs but the one thing we haven’t really had to contend with is a long, drawn out bear market. The kind that saps your soul year after year, periodically offering up hope and yanking it back away almost as quick.

The below table shows the top 10 drawdowns by scale for a 60/401 portfolio going back to 1985.

And the below chart shows the same information, just visually. Every drawdown for a 60/40 portfolio going back to 1990.

Since the Financial Crisis, a diversified portfolio hasn’t experienced a drawdown which lasted longer than a year.

Even during the Financial Crisis itself, a 60/40 portfolio managed to return to its previous high watermark in just over three years. Which doesn’t seem all that long in the context of an existential threat to capitalism.

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Market cycles seem to be speeding up, with sell-offs and subsequent recoveries taking less time. COVID offers the classic example of this, stock markets lost a third of their value in about six weeks at the start of 2020, and then went on an absolute tear of a recovery to show a profit by the end of the year. Mental.

It isn’t just markets either. The below chart shows long it took a number of household name companies to reach $1 billion of annual revenue. A billion! This used to take decades, it now takes months.

It would make sense that markets today move to re-price risk more quickly, in the modern world information is so much more quickly disseminated. It is all there, all available, all the time - and so many large market participants now trade instantly based on automated rules or strategies.

So what is the takeaway for the private investor?

One, making big changes to your financial position during periods of volatility is probably unwise. Being “out of the market” for any period of time during these events is dangerous because recent history tells us that the rip back might (probably will be) be sudden.

The second takeaway I think is that if there was a “proper, old school” bear market that took more than a couple years to play out - it would be really tough for the modern investor to take.

For the modern investor has built up a playbook on how to react to any pullback. “Buy the dip” basically.

How would they cope with a sell-off which is less shock and awe, and more death by a thousand cuts? This would be a real challenge for us all I suspect.

But as prepared, sensible investors we must be ready for this eventuality. It is not off the table.

As “buy and hold” investors the primary risk to our future outcomes is that we are thrown off our plans at the very point of maximum stress - and it is not difficult to see how a long drawn out seller’s market could induce this.

By being forewarned, we are forearmed. For investors, surprise represents the mother of disaster.

Have a great weekend.

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Past performance is not indicative of future returns. None of the above is intended to represent advice to any individual. If you have any questions regarding your specific situation, please feel free to contact me at david@beechgrovefinancialplanning.co.uk - or another regulated financial adviser.

“There’s no nobility in poverty. I’ve been rich and I’ve been poor, and I choose rich every time.”

Jordan Belfort (Leo di Caprio), “The Wolf Of Wall Street”

When I sit down with someone who is on the cusp of retirement, the conversation will inevitably turn towards how much that person thinks they would like to spend during the next phase of their lives.

And, almost every time, the conversation goes a little bit like this:

“So, if you were to retire tomorrow, how much do you imagine you would need to spend each month. More than that, in a dream scenario, how much would you love to be able to spend?”1

“Oh well, I don’t really know. We’re not extravagant people.”

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Isn’t that interesting.

We spend our working days with our nose to the grindstone, accumulating fun tokens to deploy when we hit this magic point in the future - and then when it arrives, our first thought is one of restraint. Of consciously limiting ourselves.

Now there are, of course, a couple of very good reasons for this.

As Mr Belfort (somewhat obnoxiously, and perhaps fictionally) espouses, having wealth is infinitely preferable to the alternative. And it is more than natural that when the income from the day job is switched off, folk are terrified that they will end up running out of cash.

Money is a funny thing and guilt around money, having too much or not enough, is a very real thing. It can break our brains if we think about it too much.

These behavioural biases, which we focus on so much when we think about investing, are becoming more and more important for retirees. For the traditional “guardrails” which existed around retirement spending in the past are no longer there any more. Retirees are bowling with the bumpers down.

Defined Benefit pensions are being gradually phased out. Compulsory annuitisation and restrictions on drawdown levels haven’t existed for ten years now.2

This means that retirees now have to make more decisions around how they spend their money, which is great from the perspective of flexibility - but this flexibility can create a kind of paralysis. Terrified to do anything, the layman defaults to “rule of thumb” assumptions about how much they can afford to spend.

Research tells us that most folks who fund their own retirement through drawdown, underspend what they could. According to the IFS “for those born in 1939–43, almost six-in-ten (59%) saved at age 67 but this rose to almost seven-in-ten (69%) by age 75. Over the same ages, the share of income saved by that group rose from 2% to 15%.” Instead of spending as they age - people are actually saving.

What is holding them back?

I think there is something innately British about our sense of modesty around money. “Can’t be seen to have done too well”.

Money can provide many things, the most important being time and options. Having accumulated a tidy little nest egg, you now have the opportunity to deploy these resources in any way you see fit. There are no rules.

In the same way that the ones we love couldn’t care less what car we drive or what clothes we wear - I doubt very much anyone will remember on our death beds that we flew First Class instead of Economy once or twice.

The only thing that is left when we are gone is the memories people have of us. Go for the nice dinner.

Have a great weekend.

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None of the above is intended to constitute advice to any individual. If you have questions related to your specific position, feel free to email me at david@beechgrovefinancialplanning.co.uk - or contact another regulated financial planner.

Morgan Housel

Have we always been this argumentative? Politically, historically, culturally - it can often feel like we have never been further apart.

It’s probably always been in our nature, but I think it is beyond debate now that social media has amplified the worst of our most tribal instincts.

We now live in a bear market for nuance - the internet demanding that on every conceivable issue we must pick. a. side. There can be no grey areas anymore.

Smarter minds than mine can do a better job of pointing out the dangers of such polarisation for society, but when it comes to investing - these debates are particularly unhelpful. Because every single investor on the planet is working towards a common goal.

Everyone is trying to make money, to benefit themselves and their families.

And if we subscribe to Housel’s framing that almost every investment debate can ultimately be boiled down to one factor - two people with different time horizons talking over the top of each other, we can see just how pointless 99.9% of these arguments are.

Let me give you an example.

Share The Money Den

It is incredibly fashionable for financial advisers to slag off the media. Bombastic headlines about matters that mostly don’t matter, designed to panic the individual into taking potentially irreversible, probably sub-optimal action with their money.

But when we consider that the financial journalist only cares about generating maximum engagement with their piece over a twenty four hour period - we see that they are simply playing a different game to us. We might even do the same if we were in their shoes.

So when one of these kinds of pieces gets traction1, we would do well to remember that it makes intuitive sense for the journo, who has a deadline to meet and a family to feed, to write exactly what they have written. They can only care about dealing with the task at hand.

If we are long term investors, with anything over a ten year time horizon, it makes very little sense to be offended.

This kind of content can’t possibly wind us up, for it is irrelevant to us.

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The stock picking Investment Manager who watches the markets all day every day. The “buy and hold” index investor who decides they have better things to do. The crypto evangelist. The Jittery Jonny who has been trapped in cash since the GFC. The degenerate day trader YOLO-ing into meme stocks.

Although their actions may look insane to others, each of their decisions may make perfect sense in the context of their personal experiences and/or their incentives.

There is a whole world of opinion out there. That is what makes a market. The world would be so boring if we all agreed on everything.

The trick is to take the time to determine what matters to you. To understand your guiding light, remain laser focussed on the game you are playing and remain vigilant that a lot of other people will be playing a different game. And that is fine!

Earnest disagreement is a wonderful thing. It allows us to revisit our first principles, remind ourselves why we believe what we believe. And if we listen really carefully, every once in a while, we might even learn something new.

Have a great weekend.

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None of the above is intended to represent advice to any individual. If you have queries about your individual situation, then you can contact me at david@beechgrovefinancialplanning.co.uk or consult with another regulated financial adviser.

Sorry to disappoint, but as extraordinary as Sunday was (man ran under two hours, Womble finished marathon) - we’re going in a slightly different direction this week.

As I am a bit of a data nerd, I’ve spent the last couple of years recording the amount of time that I spend on each case for each of the clients I work with.

There are a couple of reasons for this - 1. So I can ensure that each client is getting “value for money” in terms of time spent on their matter and 2. I can get a sense of how many clients the business can look after properly at capacity.

The below chart shows the relationship between the clients’ “investable assets” (on the y-axis) and the time I have spent on their case in minutes over the past year (on the x-axis).1

Now, if you can find a trend in there I’d love to hear about it because I can’t.

And that kind of aligns with what I thought on day one. That a clients’ wealth would be a poor predictor of the amount of time that case would require to manage on an ongoing basis.

The traditional wealth management model charges based on a percentage of the clients’ assets. The most common rationale being that wealthier folks have more complex affairs and therefore will demand more time from the business.

But based on my professional experience that isn’t always the case.

Wealthier clients may have perfectly simple affairs which can be dealt with in a relatively straightforward manner. While the less wealthy client may come to us with a “messier” situation and/or require more guidance and “hand holding”. It isn’t really possible to tell from the outset.

Therefore, it seems unfair to me to “punish” the more affluent client by charging more for a service that costs the same, or less, for the business to deliver.

Which is one of the reasons why we charge the way we charge.

Have a great weekend.

Book a call with me

None of the above is intended to represent advice to any specific individual. If you have any specific queries regarding your individual position, you can contact me at david@beechgrovefinancialplanning.co.uk.

If this person follows you, or tries to engage with you, this isn’t me. I don’t DM people investment “ideas”, and certainly not cryptocurrency ideas (why is it always crypto?).

I’ve reported them, if you are able to as well that would be very handy.

Thanks.

But if you are under the age of 45, your biggest asset very likely isn’t your savings or your investments or even your home. It is your future earnings power.

If you are going to work for another twenty years’ plus, particularly if you earn a few quid, those earnings (adjusted for inflation) will add up to a big number. Be a real shame if you didn’t receive it for some reason.

Sorry that sounded vaguely threatening.

Income Protection (also referred to as Permanent Health Insurance in some quarters) will pay out a tax free income, equivalent to 50%-70% of your annual gross salary, should you be unable to work due to illness or injury.

Unlike a critical illness policy, an Income Protection policy will not pay out a one off lump sum - it will pay out a regular income until such point that you are a) able to work again or b) you reach the maximum age written under the policy.1

Who is this for?

Like I said, if you earn a few quid and are relatively young you should think seriously about buying Income Protection. Not to be too morbid, but a young person is statistically far more likely to fall ill than keel over and die - and yet take up rates for Income Protection policies remain far lower than for Life Insurance.

Many employers offer some kind of sick pay, but this is dependant on the individual’s contract and there is no legal obligation to offer anything above the statutory minimum - which is peanuts.2

Self-employed folks get no statutory entitlement at all.

So if you work for yourself, have kids and a mortgage or enjoy the little luxuries in life like food and water - Income Protection will step into the gap should you be unable to do the day job.

What are the advantages?

Income Protection pay out rates are extremely high. Over the decade to 2024, Income Protection policies paid out in 97.9% of claims. Most policies will also allow for more than one claim.

The income is also paid tax free - this is the reason that these policies will only pay out a proportion of your earnings in the year before a claim. They are looking to replace your net income, not your gross.

These policies are also relatively cheap. I have run a quote for a (sort of) healthy 38 year old financial adviser, looking for £5,000 a month of inflation adjusted income up to the age of 68. And the monthly premium comes out at £72.343, which is four visits to Pret by my calculations.

Finally, these policies can be tailored in line with your requirements to an almost infinite degree.

What are the downsides?

But this flexibility also presents its own problems. It can be overwhelming to decide what the right policy is for you.

The key decisions you need to make are:

1. How much income do you need?;

2. Do you want this income to rise in line with inflation? (yes);

3. How long do you want the policy to run for?;

4. How long do you want to wait before the policy pays out?;4

5. Whether you want the policy to cover you if you cannot do your current job, or whether you want it to pay out if you can’t do any job?; and5

6. Whether you want the monthly cost to be guaranteed, or reviewable as you age?

A lot of questions and it can feel a little overwhelming for the laywoman. And that is before we get into the foibles of each individual policy’s coverage and exclusions.

For the majority of folks, these policies will never be needed and in this scenario the monthly premiums could be said to have been “wasted”. And if that’s the case, great! You have lived a healthy life.

But if it is needed Income Protection can literally be a life saver, and you can sleep well in the knowledge that if the worst were to happen you and your family can at least cover the necessities moving forwards.

Have a great weekend.

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None of the above is intended to represent advice to any individual. If you have specific queries regarding your position, then please consult with a regulated financial adviser.