Diversify away from employer shares?

furrygiraffe

Jegersmart wrote: »

Sure - fwiw I happen to agree mostly - however my point was that there could be far better options than a tracker fund. There are many out there and research is needed. If you look at the difference between a FTSE ALL-Share/250 fund and something like Marlborough Special Situations fund for example over short, medium and long term then the difference is night and day.

BTW I should mention I am not an IFA, have no affiliation with any fund or provider - I am a retail investor/trader looking out for myself.

Thank you for mentioning other options, whilst I would'nt invest in any particular fund just because its mentioned on a BB, its good to know there are other options.. the only thing I have against managed funds is the extra charges and that, apparantley, (from what I've read), over the long term most funds dont beat the trackers consistently

atush wrote: »

Also hae a look at India (due to have a larger population than China and is democratic) and the Latin america countries incl Brasil.

Yes I am aware of these emerging markets, but for now I'll stick with USA/UK and Asia Pacific. I'll see how I get on when next years ISA allowance becomes available

atush wrote: »

You aren't looking at the whole pciture here. You also decrease the term (and the long term interest on the debt) and it is risk free. Easier to do when rates are low as it makes a larger impact so that when rates do rise you'll have less mtg to pay interest on.

I am not saying to do this with all your money, just a small proportion. Even 100 quid a month makes a huge difference in interest paid over the term. We OP as well as pay 26% into pension, cash reg savers, SAYE, S&S investments, invetment trust and a direct share investments.

Your pensions look good, even your Money purchase one at 20% and increasing. Don't know how they are performing, are you allowed to choose your funds?

In normal times, this is what I'd do - if I was paying say 6-7% on my mortgage I probably would stick all my spare cash (except for an emergency buffer) into it

However, I can earn more interest in a cash-ISA (or even a top normal saving account, after tax) that I can save in interest on my mortgage.. PLUS I keep the liquidity of that cash, so that if interest rates were to rise (and saving rates did not rise in line with BOE to keep the margin) I could then transfer the money into the mortgage at a later date (having earnt more interest than I would of saved in the meantime)

As for my pension, I'm not worried about it.. it suffered during the crash of course, but last year was particularly good... there are a number of funds available (all with standard life).. I have gone with a blended fund which automatically moves your money into safer territory the closer you get to retirement

atush

In normal times, this is what I'd do - if I was paying say 6-7% on my mortgage I probably would stick all my spare cash (except for an emergency buffer) into it

However, I can earn more interest in a cash-ISA (or even a top normal saving account, after tax) that I can save in interest on my mortgage.. PLUS I keep the liquidity of that cash, so that if interest rates were to rise (and saving rates did not rise in line with BOE to keep the margin) I could then transfer the money into the mortgage at a later date (having earnt more interest than I would of saved in the meantime)

I guess my point is there are never 'normal times' in that there will be alwys something 'better' or easier to spend your money on. So you won't ever overpay incl slamming 10K or more onto the mtg when rates rise. Once you have that money in a savings or investment acct you won't want to 'give it up' as it were. I know this as I have spoent the last several years saving 250/mo in a reg saver for a new car. And don't feel inclined to let go of that money on said car lol. I am keeping the old one. And die to the number of yearsw I ahve reduced of the term of my loas, I am 'earning' more than a single years difference int he interest rates as every pound I pay off and every year I cut off the term means thousands of pounds in saved interest over the whole original term of the loan which far out weighs the 1-1.5% interest i might have had in leaving it on long term deposit for a few hundred or thousand GBP in a one year Sav acct or even a one year tracker.

furrygiraffe

atush wrote: »

I guess my point is there are never 'normal times' in that there will be alwys something 'better' or easier to spend your money on. So you won't ever overpay incl slamming 10K or more onto the mtg when rates rise. Once you have that money in a savings or investment acct you won't want to 'give it up' as it were. I know this as I have spoent the last several years saving 250/mo in a reg saver for a new car. And don't feel inclined to let go of that money on said car lol. I am keeping the old one. And die to the number of yearsw I ahve reduced of the term of my loas, I am 'earning' more than a single years difference int he interest rates as every pound I pay off and every year I cut off the term means thousands of pounds in saved interest over the whole original term of the loan which far out weighs the 1-1.5% interest i might have had in leaving it on long term deposit for a few hundred or thousand GBP in a one year Sav acct or even a one year tracker.

I get what you are saying.. and there is satisfaction is seeing your mortgage going down even quicker every month...

However, the raw numbers, in my situation, shows I'm better off not overpaying the mortgage:

i.e
£100 in mortgage saves 1.6% interest per annum net
£100 in cash-ISA earns 3.0% interest per annum net AND I have instant access

As it is, my normal mortgage payment pays over £1000 off the capital per month so I also have the satifaction of seeing it go down month by month...

When I say we are not in normal times, what I mean is thats its very odd that one can have a mortgage that charges a rate so much less than what one could get in a simple cash ISA. If BOE rate rises, then one would imagine cash-ISA rates would rise (and so the spread, as it were, between my mortgage rate and cash-ISA rate would stay the same). If the savings rate didnt rise (because, say, banks were increasing their margins) then I would still have the option of moving my savings into my mortgage.

sabretoothtigger

I am thinking of putting the bulk of the amount in HSBC Asia Pacific (ex Japan) tracker, with smaller amounts in HSBC FTSE 250 Index and HSBC American Index

ft250 is at a 4 year high incredibly
american, no i prefer tech index which is mostly usa
asia pacific index is great, very varied and all growth dependant

joerugby

I dont know anything about your company but I bought shares in mine in 1995 for £17,500 and sold them when I retired in 2007 for £200,000. Diversification is great in theory but I could never have got this kind of return in the market.

furrygiraffe

joerugby wrote: »

I dont know anything about your company but I bought shares in mine in 1995 for £17,500 and sold them when I retired in 2007 for £200,000. Diversification is great in theory but I could never have got this kind of return in the market.

Sure - its kind of why I've never sold any shares in the past... the returns I'm getting are great and the business is very stable, cash generative (even in hard economic times), doesnt rely on the UK economy and has been going for over 150 years....

I also know part of the corporate plan is to increase the share price by buying back and cancelling shares (reducing number in cirulation)

But I've got most of my eggs in one basket, and now that I'm a dad for 3 amazing kids I really need to play things a bit more safely than I have in the past (I do have an appetite for taking risks, its just that having shares in ONE company, which is my employer as well, its one heck of a risk)

As I mentioned earlier... I will still have a sizeable holding, and continue to add due to tax and bogof advantages so I will still benefit.... its just that, as others have mentioned, if something *were* to go wrong.. I dont want to be in the situation where I lose my income AND a large proportion of savings!

Jegersmart

joerugby wrote: »

I dont know anything about your company but I bought shares in mine in 1995 for £17,500 and sold them when I retired in 2007 for £200,000. Diversification is great in theory but I could never have got this kind of return in the market.

Likewise you could have got zero. This is purely a risk management exercise that everyone has to look at and is extremely subjective.

No one is saying diversification is the best way every time, just as one could not say that holding one share for 12 years plus and making a good return is the best way every time. I don't have enough data to say whether you were extremely lucky or not, but judging by the overall performance of the FTSE100 over that time I would say that you were at worst "very fortunate"

IMHO, DYOR

Jegersmart

furrygiraffe wrote: »

i.e
£100 in mortgage saves 1.6% interest per annum net
£100 in cash-ISA earns 3.0% interest per annum net AND I have instant access
.

sure, but it reduces the interest that you would *ever* pay on that £100 to zero........

again, paying off mortgages is not "sexy" and you seem to be very sensible so it is just a thought:) If lending tightens during longer periods in the future (which I suspect may be the case) then a draw-down on your mortgage may be difficult so again this is a balancing act of risk etc etc.

imho, dyor