Royal wedding a boost for shares?
As the royal newly-weds begin their carefree honeymoon in a remote corner of the Seychelles, should canny investors be muscling into some British shares and managed funds to cash in on the Wills and Kate effect?Leading fund manager Fidelity identifies curious similarities in the backdrop to this latest royal spectacular and the ill-fated 1981 pairing of the Prince of Wales and Lady Diana Spencer, such as: Spending cuts; rising unemployment; special taxes for banks and North Sea oil producers; inflation; unrest on the streets; and, it says, "a new and untested government trying to convince the public that its bold and unpopular plans were the way forward to a stronger economy."
Like today, there seemed little reason to buy shares in 1981.
Fidelity says: "Shares failed to keep pace with the cost of living in the 1970s and looking forward, the outlook appeared bleak.
"However, hindsight shows that the year of the royal wedding was a good time to invest."
Beginning 1981 at a shade under 300, the FTSE All-Share Index barely paused for breath - apart from the great crash in 1987 - and by 2000, it was worth 10 times as much.
Overall, the 30-year return since Charles and Diana, Princess of Wales's wedding has been a very attractive 8% a year above inflation.
Fidelity claims the biggest blue chip gainer in the FTSE 100 Index, Unilever, turned a £1,000 investment in 1981 into £85,240 today, while the same money put into Rio Tinto became £73,436, and even BP managed a gain with a figure of £37,460 despite its recent travails.
Fidelity investment director Tom Stevenson says: "The real, inflation adjusted, value of £1,000 invested in 1981 with gross dividends reinvested is £9,630 today. On that basis, there is not a single 30-year period since 1899 when investing has not provided a positive real return.
"At a time of rising inflation, the ability of the stock market to protect investors from its pernicious effects should not be overlooked.
"For most of the last century, shares with reinvested dividends have maintained the value of an investor's savings over a 30-year time frame and delivered a return of 4% - 8% a year on top."
Could history be about to repeat itself?
Savers with money earning minimal interest in a bank and paying into building society savings accounts obviously hope so.
Shares, right now, are yielding much more: research from Capita Registrars shows dividends paid out in the first quarter of 2011 totalled £15 billion, up 10.3% on 2010. Firms have cut staff and built cash reserves to reward shareholders.
But Patrick Connolly, at financial advisors AWD Chase de Vere, urges caution.
"Fidelity is clutching at straws," he says.
"Any link between the 1981 wedding and a rise in shares is purely coincidental. This latest wedding was actually negative to gross domestic product, because of two successive bank holiday weekends.
"This is a hugely uncertain time to back shares, which means they offer both risk and opportunity. Over the long term, shares are probably a good buy, with the London market still well below the 1999 peak, but share prices could fall before they go back up.
"Investors should only buy shares in a suitably balanced portfolio alongside fixed interest bonds and commercial property. Diversify your investments, and hold shares in secure, global companies paying regular dividends, of which there are plenty right now. The safest way to find these is through UK and global equity income funds."
Richard Hunter, a stock-picker at brokers Hargreaves Lansdown, says: "Any link between royal weddings and shares is only coincidence, but we stand by our forecast for the FTSE 100 at the end of 2011 as 6500, roughly 500 ahead of where it is today.
"The London market is finely balanced. On the plus side, company results in the first quarter have been strong, with results in 70-80% of cases tending to exceed expectations.
"The other big driving factor for shares is the lack of return for income seekers elsewhere. Some FTSE 100 shares, such as Aviva and United Utilities, pay 6% plus and plenty more are paying 5% plus.
"Against that, huge concerns surround Europe's sovereign debt crisis, inflation globally, the possibilities that the Chinese have put the brakes on their economy too early, and fears the US is not taking a serious look at its enormous debts.
"Couple all that with Britain entering a new age of austerity, and you see why investors jump into gold and safe havens at the first hint of any real trouble."
Nick Raynor at The Share Centre doubts Fidelity too.
"The royal wedding provided a temporary injection of positive news, but the markets have probably forgotten about it already. I can't see it will have any impact at all beyond about two months or so."
Raynor thinks companies benefiting from the royal celebrations could include InterContinental Hotels, Whitbread (for Premier Inn hotels) and ITV (from briefly higher advertising rates).
"Generally, we are being quite defensive," he says.
"We like utilities firms such as Northumbrian Water with strong, steady income streams, and solid, blue chips paying good dividends - Vodafone and GlaxoSmithKline."
Many savers have been moving money into new funds: the Association of Investment Companies says £451 million has been raised in recent weeks by launches of Duet Real Estate Finance (£42 million), Diverse Income Trust (£50 million), Henderson International Income (£42 million) and NB Global Floating Rate Income (£309 million).
All of these offer the promise of regular income, coupled with a measure of capital growth - perhaps an annual return of 6-7%, far more generous than most savings accounts.
There is also a huge drift of funds into 'protected' funds which guarantee the original capital and pay an additional sum decided by key factors, usually market indices.
The latest Protected Equity Bond (PEB) from Nationwide BS on minimum £3,000 investments is a six-year plan. It can be held in an ISA, and pays a final return linked to the performances of three stock market indices.
Nationwide's Robin Bailey says: "The new PEB is designed to return your capital plus a minimum 7% gross - 1.13% AER - after six years."
It's safe, but could disappoint if inflation stays high. Yet £23 million was moved by savers into protected bonds in 2010/11 alone, and more than £60 million since 2007.
For those who think the bursting of the commodities price bubble is a flash in the pan, The Share Centre also backs the JP Morgan Natural Resources Fund, which holds a diversified portfolio of companies with exposure to global resources and energy.
Over five years, this fund has delivered an impressive 63.4% - thanks, partly, to gold which was booming in price long before Kate Middleton's walk up the aisle of Westminster Abbey!
:: Information: Nationwide BS (08457 302010 and www.nationwide.co.uk); The Share Centre (01296 414 141 and www.thesharecentre.co.uk); AWD Chase de Vere (0845 140 4014 and www.awdchasedevere.co.uk).
Poundnotes
:: As inflation climbs, the new Index-linked Savings Certificates from National Savings & Investments (NS&I) promised in the Budget might not be available for long, warns Danny Cox at financial advisor Hargreaves Lansdown.
On minimum investments of £100 (maximum £15,000 per issue), an inflation rate of 5.3% means the certificates will pay 7.25% to a basic rate taxpayer, 9.67% to a higher rate taxpayer and 11.60% to a an additional rate taxpayer, although the money is locked in for five years.
Cox says: "I am very pleased Index-linked Certificates remain linked to the Retail Prices Index rather than the Consumer Prices Index which would have been lower, but they will be very popular and NS&I might very soon reach their target on this product."
Index-linked certificates pay no income, with tax-free interest added on maturity. Early withdrawals are subject to penalty.
Patrick Connolly, at Chase de Vere, says: "These products should form an important part of many investment portfolios, particularly for higher rate taxpayers.
"Many savers currently face the dilemma of losing money in real terms on cash savings or putting capital at risk as in search of better returns. This is the only way savers can be sure of beating inflation while still protecting capital.
"While terms of the new issue are less competitive than previous issues and NS&I wants the products to be around for a 'sustained period', potential savers should invest sooner rather than later, as these products may not be around for too long."
Kevin Mountford, at moneysupermarket.com, said: "With inflation forecast to remain high for the next two years, this will look attractive to anyone keen to protect the value of their savings pot.
"NS&I Savings Certificates have been extremely popular due to their tax free status and Government- backed protection so we expect strong demand again.
"However, these Savings Certificates represent a long-term commitment to saving so are appropriate for those comfortable with locking their money away for five years."
Customers should also note the interest rate, based on Retail Prices Index figures, is calculated on an annual, rather than a monthly basis. If inflation fell unexpectedly, customers could be stuck with a less than competitive rate.
Enquiries: 0500 500 000 and at www.nsandi.com, where an application form can be downloaded. Not available at Post office branches.
:: Soaring energy bills can sink household budgets, warns debt advice charity the Money Advice Trust, which urges consumers to pay close attention to fuel costs after a rise in the number of people with fuel debts seeking advice.
Since 2007, National Debtline, run by the Money Advice Trust, has seen a 181% increase in clients with fuel debts. The last year has seen a 10% rise in problems with fuel debts.
Joanna Elson OBE, Money Advice Trust chief executive, says: "Fuel debts are one of the fastest growing problems at National Debtline.
"It is vital to pay close attention to how much gas or electricity we use and whether or not we have the right tariff, not always an easy decision.
"We have worked closely with some energy companies which want to help customers get back to a healthier financial position.
"Fuel debts should be treated as a priority debt as gas and electricity companies are free to cut off supplies within weeks to non-payers. There are options available to those who are struggling."
National Debtline helps people plan a budget and finds out if someone is paying too much for your utilities. They can also go through this process at www.mymoneysteps.org
There is also advice available to help prioritise debts and produce a plan for tackling them. Some fuel companies have trust funds which can sometimes settle fuel bills where customers are in financial difficulties.
Enquiries: 0808 808 4000 and www.nationaldebtline.co.uk
:: Income-seeking savers get 4.05% gross/AER from the new three-year bond from Yorkshire BS
Yorkshire BS savings product manager Mike Helliwell says: "The latest bond offers a competitive return while interest rates remain low and a certainty of rate or return for three years, maturing in May 2014."
A monthly interest option is available for those who rely on their savings for income, on minimum £1,000 investment.
The bond can be opened at one of Yorkshire BS's 135 branches or 90 agencies or online.
Enquiries: 0845 120 0100 and www.ybs.co.uk
:: Few savers are disciplined enough to fix an annual ISA this early in the tax year, with an investment limit of £10,680 in 2011/12, but Alan Easter, at discount broker Willis Owen, says many customers want to escape poor-paying bank and building society savings accounts.
Willis Owen says its top-selling managed funds for ISA investors in March 2011 is headed by M&G Global Basics, followed by Invesco Perpetual High Income, Jupiter Merlin Worldwide Portfolio, Standard Life Investments UK Smaller Companies R Fund and Artemis Income Fund at number five.
Easter says: "If you don't have a lump sum to invest, then drip-feeding money into the market to a maximum of £890 per month is a great way to build a savings pot."
Willis Owen: 0800 597 2525 and www.willisowen.com
:: High five savers
Phone No Rate Account Period Deposit Interest paid
Birmingham Midshires www.askbm.co.uk 5.05% (F) Internet Fixed Rate Bond Five Years £1 Yly
AA 0845 603 6302 5.00% (F) Fixed Rate Savings Five years £1 Yly
Santander 0800 234 6065 3.30% Flexible ISA Issue 3 Instant £1 Yly
Whiteaway Laidlaw Bank 0845 266 6611 3.30% 90 Day Premium Notice 90 Days £1,000 Yly
Close Savings 0207 392 1772 3.15% Premium Gold 180 Day 180 Days £10,000 Qly
:: Top five borrowers
Phone No Rate Period Max% Adv Fee Incentive
HSBC 0800 494999 2.39% variable for term 60% £99 Yes
Mansfield BS 01623 676345 2.50% for two years 75% £599 Yes
ING Direct 0845 032 8800 2.50% disc until 31/06/13 70% none Yes
First Direct 0845 610 0100 2.79% variable for term 65% £199 Yes
Nat'l Counties BS 0845 603 4876 3.09% to 31/03/13 75% £495 Yes
Code:
*K- Operated by Internet, Telephone, or Post
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
Beginning 1981 at a shade under 300, the FTSE All-Share Index barely paused for breath - apart from the great crash in 1987 - and by 2000, it was worth 10 times as much.
Overall, the 30-year return since Charles and Diana, Princess of Wales's wedding has been a very attractive 8% a year above inflation.
Fidelity claims the biggest blue chip gainer in the FTSE 100 Index, Unilever, turned a £1,000 investment in 1981 into £85,240 today, while the same money put into Rio Tinto became £73,436, and even BP managed a gain with a figure of £37,460 despite its recent travails.
Fidelity investment director Tom Stevenson says: "The real, inflation adjusted, value of £1,000 invested in 1981 with gross dividends reinvested is £9,630 today. On that basis, there is not a single 30-year period since 1899 when investing has not provided a positive real return.
"At a time of rising inflation, the ability of the stock market to protect investors from its pernicious effects should not be overlooked.
"For most of the last century, shares with reinvested dividends have maintained the value of an investor's savings over a 30-year time frame and delivered a return of 4% - 8% a year on top."
Could history be about to repeat itself?
Savers with money earning minimal interest in a bank and paying into building society savings accounts obviously hope so.
Shares, right now, are yielding much more: research from Capita Registrars shows dividends paid out in the first quarter of 2011 totalled £15 billion, up 10.3% on 2010. Firms have cut staff and built cash reserves to reward shareholders.
But Patrick Connolly, at financial advisors AWD Chase de Vere, urges caution.
"Fidelity is clutching at straws," he says.
"Any link between the 1981 wedding and a rise in shares is purely coincidental. This latest wedding was actually negative to gross domestic product, because of two successive bank holiday weekends.
"This is a hugely uncertain time to back shares, which means they offer both risk and opportunity. Over the long term, shares are probably a good buy, with the London market still well below the 1999 peak, but share prices could fall before they go back up.
"Investors should only buy shares in a suitably balanced portfolio alongside fixed interest bonds and commercial property. Diversify your investments, and hold shares in secure, global companies paying regular dividends, of which there are plenty right now. The safest way to find these is through UK and global equity income funds."
Richard Hunter, a stock-picker at brokers Hargreaves Lansdown, says: "Any link between royal weddings and shares is only coincidence, but we stand by our forecast for the FTSE 100 at the end of 2011 as 6500, roughly 500 ahead of where it is today.
"The London market is finely balanced. On the plus side, company results in the first quarter have been strong, with results in 70-80% of cases tending to exceed expectations.
"The other big driving factor for shares is the lack of return for income seekers elsewhere. Some FTSE 100 shares, such as Aviva and United Utilities, pay 6% plus and plenty more are paying 5% plus.
"Against that, huge concerns surround Europe's sovereign debt crisis, inflation globally, the possibilities that the Chinese have put the brakes on their economy too early, and fears the US is not taking a serious look at its enormous debts.
"Couple all that with Britain entering a new age of austerity, and you see why investors jump into gold and safe havens at the first hint of any real trouble."
Nick Raynor at The Share Centre doubts Fidelity too.
"The royal wedding provided a temporary injection of positive news, but the markets have probably forgotten about it already. I can't see it will have any impact at all beyond about two months or so."
Raynor thinks companies benefiting from the royal celebrations could include InterContinental Hotels, Whitbread (for Premier Inn hotels) and ITV (from briefly higher advertising rates).
"Generally, we are being quite defensive," he says.
"We like utilities firms such as Northumbrian Water with strong, steady income streams, and solid, blue chips paying good dividends - Vodafone and GlaxoSmithKline."
Many savers have been moving money into new funds: the Association of Investment Companies says £451 million has been raised in recent weeks by launches of Duet Real Estate Finance (£42 million), Diverse Income Trust (£50 million), Henderson International Income (£42 million) and NB Global Floating Rate Income (£309 million).
All of these offer the promise of regular income, coupled with a measure of capital growth - perhaps an annual return of 6-7%, far more generous than most savings accounts.
There is also a huge drift of funds into 'protected' funds which guarantee the original capital and pay an additional sum decided by key factors, usually market indices.
The latest Protected Equity Bond (PEB) from Nationwide BS on minimum £3,000 investments is a six-year plan. It can be held in an ISA, and pays a final return linked to the performances of three stock market indices.
Nationwide's Robin Bailey says: "The new PEB is designed to return your capital plus a minimum 7% gross - 1.13% AER - after six years."
It's safe, but could disappoint if inflation stays high. Yet £23 million was moved by savers into protected bonds in 2010/11 alone, and more than £60 million since 2007.
For those who think the bursting of the commodities price bubble is a flash in the pan, The Share Centre also backs the JP Morgan Natural Resources Fund, which holds a diversified portfolio of companies with exposure to global resources and energy.
Over five years, this fund has delivered an impressive 63.4% - thanks, partly, to gold which was booming in price long before Kate Middleton's walk up the aisle of Westminster Abbey!
:: Information: Nationwide BS (08457 302010 and www.nationwide.co.uk); The Share Centre (01296 414 141 and www.thesharecentre.co.uk); AWD Chase de Vere (0845 140 4014 and www.awdchasedevere.co.uk).
Poundnotes
:: As inflation climbs, the new Index-linked Savings Certificates from National Savings & Investments (NS&I) promised in the Budget might not be available for long, warns Danny Cox at financial advisor Hargreaves Lansdown.
On minimum investments of £100 (maximum £15,000 per issue), an inflation rate of 5.3% means the certificates will pay 7.25% to a basic rate taxpayer, 9.67% to a higher rate taxpayer and 11.60% to a an additional rate taxpayer, although the money is locked in for five years.
Cox says: "I am very pleased Index-linked Certificates remain linked to the Retail Prices Index rather than the Consumer Prices Index which would have been lower, but they will be very popular and NS&I might very soon reach their target on this product."
Index-linked certificates pay no income, with tax-free interest added on maturity. Early withdrawals are subject to penalty.
Patrick Connolly, at Chase de Vere, says: "These products should form an important part of many investment portfolios, particularly for higher rate taxpayers.
"Many savers currently face the dilemma of losing money in real terms on cash savings or putting capital at risk as in search of better returns. This is the only way savers can be sure of beating inflation while still protecting capital.
"While terms of the new issue are less competitive than previous issues and NS&I wants the products to be around for a 'sustained period', potential savers should invest sooner rather than later, as these products may not be around for too long."
Kevin Mountford, at moneysupermarket.com, said: "With inflation forecast to remain high for the next two years, this will look attractive to anyone keen to protect the value of their savings pot.
"NS&I Savings Certificates have been extremely popular due to their tax free status and Government- backed protection so we expect strong demand again.
"However, these Savings Certificates represent a long-term commitment to saving so are appropriate for those comfortable with locking their money away for five years."
Customers should also note the interest rate, based on Retail Prices Index figures, is calculated on an annual, rather than a monthly basis. If inflation fell unexpectedly, customers could be stuck with a less than competitive rate.
Enquiries: 0500 500 000 and at www.nsandi.com, where an application form can be downloaded. Not available at Post office branches.
:: Soaring energy bills can sink household budgets, warns debt advice charity the Money Advice Trust, which urges consumers to pay close attention to fuel costs after a rise in the number of people with fuel debts seeking advice.
Since 2007, National Debtline, run by the Money Advice Trust, has seen a 181% increase in clients with fuel debts. The last year has seen a 10% rise in problems with fuel debts.
Joanna Elson OBE, Money Advice Trust chief executive, says: "Fuel debts are one of the fastest growing problems at National Debtline.
"It is vital to pay close attention to how much gas or electricity we use and whether or not we have the right tariff, not always an easy decision.
"We have worked closely with some energy companies which want to help customers get back to a healthier financial position.
"Fuel debts should be treated as a priority debt as gas and electricity companies are free to cut off supplies within weeks to non-payers. There are options available to those who are struggling."
National Debtline helps people plan a budget and finds out if someone is paying too much for your utilities. They can also go through this process at www.mymoneysteps.org
There is also advice available to help prioritise debts and produce a plan for tackling them. Some fuel companies have trust funds which can sometimes settle fuel bills where customers are in financial difficulties.
Enquiries: 0808 808 4000 and www.nationaldebtline.co.uk
:: Income-seeking savers get 4.05% gross/AER from the new three-year bond from Yorkshire BS
Yorkshire BS savings product manager Mike Helliwell says: "The latest bond offers a competitive return while interest rates remain low and a certainty of rate or return for three years, maturing in May 2014."
A monthly interest option is available for those who rely on their savings for income, on minimum £1,000 investment.
The bond can be opened at one of Yorkshire BS's 135 branches or 90 agencies or online.
Enquiries: 0845 120 0100 and www.ybs.co.uk
:: Few savers are disciplined enough to fix an annual ISA this early in the tax year, with an investment limit of £10,680 in 2011/12, but Alan Easter, at discount broker Willis Owen, says many customers want to escape poor-paying bank and building society savings accounts.
Willis Owen says its top-selling managed funds for ISA investors in March 2011 is headed by M&G Global Basics, followed by Invesco Perpetual High Income, Jupiter Merlin Worldwide Portfolio, Standard Life Investments UK Smaller Companies R Fund and Artemis Income Fund at number five.
Easter says: "If you don't have a lump sum to invest, then drip-feeding money into the market to a maximum of £890 per month is a great way to build a savings pot."
Willis Owen: 0800 597 2525 and www.willisowen.com
:: High five savers
Phone No Rate Account Period Deposit Interest paid
Birmingham Midshires www.askbm.co.uk 5.05% (F) Internet Fixed Rate Bond Five Years £1 Yly
AA 0845 603 6302 5.00% (F) Fixed Rate Savings Five years £1 Yly
Santander 0800 234 6065 3.30% Flexible ISA Issue 3 Instant £1 Yly
Whiteaway Laidlaw Bank 0845 266 6611 3.30% 90 Day Premium Notice 90 Days £1,000 Yly
Close Savings 0207 392 1772 3.15% Premium Gold 180 Day 180 Days £10,000 Qly
:: Top five borrowers
Phone No Rate Period Max% Adv Fee Incentive
HSBC 0800 494999 2.39% variable for term 60% £99 Yes
Mansfield BS 01623 676345 2.50% for two years 75% £599 Yes
ING Direct 0845 032 8800 2.50% disc until 31/06/13 70% none Yes
First Direct 0845 610 0100 2.79% variable for term 65% £199 Yes
Nat'l Counties BS 0845 603 4876 3.09% to 31/03/13 75% £495 Yes
Code:
*K- Operated by Internet, Telephone, or Post
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
© 2013 Press Association