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Weekend press review: investment matters

Before we start our review of what was actually on the money pages yesterday, it’s interesting to see what wasn’t there. With all the talk of Brexit and the implications of the Withdrawal Agreement, financial journalists have opted to postpone any analysis of the implications of this matter for readers’ financial situations – probably hoping for things to become a little clearer as we speed towards 29 March 2019.

Writing in the Financial Mail on Sunday, Jeff Prestridge is reminding readers about the value of compound interest – and the compounding effect of the reinvestment of dividends as part of overall investment returns. He quotes research from AJ Bell which looks at the performance of the FTSE 100 stocks over the past ten years. Their research reinforced the thinking that the effect of reinvesting dividend income can make a big positive difference to overall investment returns, and also that the longer investors are able to keep the income tap off, the better.  As Russ Mould, author of the research, says ‘The real power of compounding – reinvesting dividends – only starts to kick in after eight to ten years.’

Also in the MoS, Prestridge is reporting on the recent performance of fund manager Mark Barnett who replaced Neil Woodford as head of UK equities at Invesco in early 2014. Barnett manages the Invesco Income and High Income funds previously run by Woodford, as well as the Edinburgh and Perpetual Income and Growth ITs.  The MoS article highlights research which shows that Barnett ranked 84th out of 85 equity income managers over the past three years – with Woodford coming in at 85. In the article Barnett insists that his approach will come good eventually, with its heavy exposure to domestic sectors as he is “… seeking the best opportunities to create a sustainable flow of dividend income.”

The Sunday Telegraph Money section reports on upcoming changes to NS&I’s Index linked savings certificates next year. At the moment, payments on the certificates rise by the retail prices index (RPI) but from next May the consumer prices index (CPI) will be used instead. As Sam Brodbeck points out, looking at this year’s RPI and CPI figures, such a change would mean that those with £25,000 invested would lose out to the tune of roughly £200 in interest.

Buffettology. That’s the topic for The Sunday Times Money section this weekend and is certainly something that might provoke a few interested questions from clients this week. It reports on the UK Buffettology fund, which was launched in 2011 and is managed by Keith Ashworth-Lord using the investment approach of the “sage of Omaha” Warren Buffett as the process for stock selection. The article reports that Ashworth-Lord’s fund has beaten Buffett’s performance since launch in 2011 – and over the past five year period with the fund which holds just 30 stocks.   Buffett’s investment philosophy is to find a predictable business with a healthy balance sheet and strong barriers to any potential competition. Needless to say, Ashworth-Lord is using the same approach.  The article gives background detail about how he manages the fund, including his purchase of shares in Buffett’s own Berkshire Hathaway in recent months.

In his personal account column, Ian Cowie reflects on the demise of Johnston Press (publisher of the i newspaper) and the implications for the group’s employees’ pensions. As he reports, at least the PPF is there to provide a statutory safety net for them although there are still losses involved for scheme members compared to what they might have expected from their employer’s pension scheme.  His message is simple. That there is no such thing as a “risk free” pension and that people need to ensure that they adequately save for their retirement – as relying on others “…is a recipe for disappointment.” It’s a message which we expect many financial planners deliver to their clients time and time again. At least they are hearing the message from their Sunday newspaper too.

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