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Expat Investor : March April 2009
INVESTMENT COMMENT Tracking investors’ flight to safety Lloyds TSB Wealth Management weighs up the balance of investors’ funds in equities, bonds and cash instruments. The flight from equities continues, with over a quarter (28%) of stock market investors saying they have moved some or all of their money into more cautious investments, such as cash or bonds, in the past six months, according to a report from Lloyds TSB Wealth Management. The report, which tracks investor confidence on a six-monthly basis, shows a 17% increase in the number of investors who have fled from equities into ‘safer’ bets, such as cash and bonds, when compared with the November 2007 report. However, after a sharp drop in the average amount invested in equities in the first six months of the year (from £52,000 in November 2007 to £22,500 in July 2008), the rush from the markets seems to have stalled, with the average investor still having approximately the same amount in the markets as six months ago (£22,500 in July 2008 to £23,500 in December 2008). Nathan Moss, Managing Director, Lloyds TSB Wealth Management, comments, “Money is still moving to ‘safer’ investments, such as cash and bonds, as confidence in the future of the markets continues to be shaky. However, investors should keep an eye on their long term goals and seek professional advice before making any decisions.” Investor reaction over the past six months As the turbulence in the financial markets continues, nearly two-thirds (63%) of investors say they have felt apprehensive about stock market investments in the past six months, up from 54% in July 2008 and 37% in November 2007. This contributed to 66% reviewing their investments in the past six months. For investors who have made changes to their portfolios over the past six months, 58% moved some or all of their money into more cautious investments (such as cash or bonds), including seven per cent moving their entire portfolio. One in ten decided to play the market by putting more money into equities and hoping to profit from a recovery – slightly down from 12% in July 2008. When it comes to influencing investors, the financial pages of the papers have a role to play, with 58% of investors who made changes to their portfolio acting on what they had seen, heard or read in the media/on the internet. Less than a third took action based on professional guidance from their financial adviser or bank. Prospects for the coming year Investors’ misgivings about the future of the market continue to dominate, with more than half saying they feel apprehensive about stock market investments over the coming year, down, however, from 63% feeling apprehensive about the last six months. One in five feel confident about the future of the markets, compared to 16% for the past six months.However, planning for the future may be the answer, with over a quarter (27%) of respondents who have a structured financial plan feeling confident about the future of the market, compared with just 14% of those who do not. Pessimistic investors continue to feel negative about the future, with 53% of those who feel apprehensive believing the return from the FTSE in recent years hasn’t been good, and the downward tumble is set to continue. Nearly a third (31%) think the stock market is too risky to invest in and 15% believe equities won’t outperform cash and * 2008 Winner Best International Private Bank Group Best International Wrap Provider 2007 Winner Best International Private Bank Best International Investment Platform Provider 2006 Winner Best Offshore Bank Best Commitment to Service 2005 Winner Best Offshore Bank Best Offshore Bank Product (FOCUS) Best Internet Service 2004 Winner Best Offshore Bank 2003 Winner Best Offshore Bank Best Offshore Bank Product (FOCUS) 2002 Winner Best Offshore Bank Best Offshore Bank Product (FOCUS) 2001 Winner Best Offshore Banking Product Range bonds in the long-term. However, amongst optimistic investors, 51% of those who are confident in the future of the market believe short-term blips in the market should be ignored and stocks and shares should be looked at as a long-term investment. Forty-six per cent think that the stock market will outperform cash and bonds and a third (29%) believe in the resilience of the markets. Looking to the future Asked in July 2008 about their confidence in their long-term financial futures, 47% felt confident about their future financial prospects while only 22% felt pessimistic. But the continued turbulence has meant that increasing confidence is unlikely to prompt a rally in the FTSE, with just 42% of investors today feeling optimistic about their financial future and 28% expressing their pessimism. Again, financial planning does appear to be the answer, with 52% of those with a plan in place feeling confident about their financial futures, compared with just 34% amongst those who did not. Restoring confidence When asked what actions would contribute to a return of confidence in the markets, answers were varied. Forty-two per cent of respondents believe the resumption of interbank lending is key to rebuilding faith in the markets, followed by global coordination on monetary policy (31%), greater transparency from financial institutions (30%) and falling base rates (29%). “This data could indicate a turning point for the markets.We are seeing investors pausing before moving more cash out of the FTSE and Government and global intervention is potentially beginning to restore investor faith. “Whatever their next move, investors should seek expert financial advice and be aware of the consequences of their actions before making a rash decision that they might come to regret,” adds Mr Moss. The award-winning account that adapts to your needs. Focus * Best International Wrap Provider Focus from Fairbairn Private Bank is a fully integrated banking and investment service that can constantly change to meet your evolving requirements. With a multi-currency bank account, gold status Visa card, fixed term deposits, foreign exchange, share dealing services, investments, lending, structured products and pensions, this is truly a service for everyday life, throughout your life. So if you’re looking for the most adaptable, award-winning account from the Best International Wrap Provider, take a closer look at Fairbairn Private Bank. To find out more about our award-winning wealth management services, call us on+44 (0) 1624 645000 or visit www.fairbairnpb.com distinctly different Fairbairn Private Bank is a registered trade name of Fairbairn Private Bank (IOM) Limited and Fairbairn Private Bank Limited. Fairbairn Private Bank (IOM) Limited is licensed by the Isle of Man Financial Supervision Commission to take deposits and provide investment services. Registered office: St Mary’s Court 20 Hill Street Douglas Isle of Man. The London office is authorised and regulated in the UK by the Financial Services Authority. 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