The economy and the autumn statement

Generali

chucknorris wrote: »

That's the problem when the markets and property prices are (historically) high or near their highs, nothing looks particularly tempting. As I said on the other thread, I am currently in the 'if in doubt, do nowt' camp. Not particularly adventurous I admit, but then again I am looking for adventure, I am nowhere near as bullish as some on here believe.

If you sit on your hands then at least you don't face frictional costs: no EA fees or brokerage costs let alone the dreaded CGT event:eek:.

I don't know where markets go from here. The only way is down? I suspect that US investments might be the way forward. If monetary policy is driving markets and US monetary policy is what matters then perhaps the Fed will raise rates in line with what the US needs. That means US funds might outperform.

The problem with that argument is that bond or stock prices aren't a vote on the performance of the wider economy, popular to contemporary opinion.

chucknorris

Generali wrote: »

If you sit on your hands then at least you don't face frictional costs: no EA fees or brokerage costs let alone the dreaded CGT event:eek:.

I don't know where markets go from here. The only way is down? I suspect that US investments might be the way forward. If monetary policy is driving markets and US monetary policy is what matters then perhaps the Fed will raise rates in line with what the US needs. That means US funds might outperform.

The problem with that argument is that bond or stock prices aren't a vote on the performance of the wider economy, popular to contemporary opinion.

I'm much more comfortable (ironically) with investment choices in the middle of a recession when everything looks like a bargain. But I can't have it both ways, in a recession investing, then watching my asset grow, and then complaining that there isn't any value going forward, I can't have my cake and eat it.

chucknorris

cells wrote: »

Or buy shares in a REIT which are meant to distribute 90% of the rents to shareholders.

I don't think that this is correct, when reading up on these this morning, I read that it was 90% of the profit (not 90% of the rents). But I suspect that you meant to type that, as 90% of the rent would have been unbelievably generous.

See page 43 from the link: http://www.britishland.com/~/media/Files/B/British-Land/downloads/investor-downloads/pdf_85.pdf

cells

chucknorris wrote: »

I don't think that this is correct, when reading up on these this morning, I read that it was 90% of the profit (not 90% of the rents). But I suspect that you meant to type that, as 90% of the rent would have been unbelievably generous.

See page 43 from the link: http://www.britishland.com/~/media/Files/B/British-Land/downloads/investor-downloads/pdf_85.pdf

yes that is what I meant. AFAIK a lot of the REITs are very low gearing. From memory I think the shaftsbury REIT was geared just 20%. If a REIT was 0% geared then it would effectively have to pay out at least 90% of the profit and the profit would be the net rent

personally I wish there were higher geared London and other area residential reits. I would not mess around with investing in BTLs myself if there was a 75% geared London REIT. although it would have to be a reit that continuously keeps to 70-75% gearing (as house prices go up they borrow more money and buy more homes).

Such a reit if it invested in a market that grew by 8.8% a year (eg london 1995-2015) would have compounded 35% a year. Or £100,000 invested in 1995 would be worth £40 million today. That is a ~400x nominal increase and a ~200x real increase. Surely one of the best investments ever. Even apple is 'only' up ~80x nominal 40x real between 1995 to now

how did the wiz kids in the city miss this one?

antrobus

chucknorris wrote: »

The main disadvantage that I perceive with annuities is that they are taxed at 20% and 40% (rather than 7.5% and 32.5%, which dividend income is taxed at).....

Only if it's a pension annuity. For a purchased life annuity, only a proportion of the income will be taxable, and thus the effective tax rate will be lower.

cells wrote: »

...personally I wish there were higher geared London and other area residential reits. I would not mess around with investing in BTLs myself if there was a 75% geared London REIT. although it would have to be a reit that continuously keeps to 70-75% gearing (as house prices go up they borrow more money and buy more homes)....

If you are a property bull, gearing is good, the more the better. But if prices were to fall, it magnifies your losses. There is no reward without risk.

cells wrote: »

..how did the wiz kids in the city miss this one?

Perhaps they understand gearing?

chucknorris

antrobus wrote: »

Only if it's a pension annuity. For a purchased life annuity, only a proportion of the income will be taxable, and thus the effective tax rate will be lower.

That's because you are also withdrawing capital which isn't taxable, you don't pay tax when withdrawing your own capital, but you would be paying the higher rate of tax on the non capital withdrawals. I am talking about a pension annuity, the whole point (for me) of the annuity would be to hedge against living much longer than anticipated, so that I could spend more capital, there would be no hedge with a annuity of a specified duration.

antrobus

chucknorris wrote: »

That's because you are also withdrawing capital which isn't taxable, you don't pay tax when withdrawing your own capital, but you would be paying the higher rate of tax on the non capital withdrawals. I am talking about a pension annuity, the whole point (for me) of the annuity would be to hedge against living much longer than anticipated, so that I could spend more capital, there would be no hedge with a annuity of a specified duration.

That's correct. Except that a purchased life annuity normally does not have a specified duration either.

chucknorris

antrobus wrote: »

That's correct. Except that a purchased life annuity normally does not have a specified duration either.

That is not correct, it can be either based on life or a specified duration:

https://www.adviserzone.com/adviser/public/adviserzone/individual/products/retirementincome/annuities/pla

But the point is, if it was a life long product it is merely a mix of a traditional pension annuity and capital withdrawal, i.e. a halfway house product, what I want is a pension annuity, for the reasons mentioned above.