Making plans for growth

Investment Masterclass

Graham Newsome. Age: 42. Occupation: Architect

Graham Newsome. Age: 42. Occupation: Architect

Graham Newsome set up his own architectural/ design company two years ago, and its success has led to an increase in income andthe need for him to reconsider his circumstances.

He and his wife have a house valued at approximately £180,000 on which there is a pension-linked mortgage of £106,000. Mr Newsome has been funding his pension since 1985 but the fund is only worth around £ 20,000 to date. The recentmaturity of a property investment has given him £30,000 to invest and he has a further £15,000 in a director's account.Aside from this, the only other monies he has invested are in a Tessa account.

Mr Newsome's primary objective is to expand his business and because of this he needs to retain as much flexibility within hisinvestment planning strategy as is possible. He has also expressed concern over the size of his mortgage and his pension fund.

The adviser: Tim Cockerill, managing director at Whitechurch Securities, independent financial advisers in Bristol (0117 9442266)

The advice: Mr Newsome's main dilemma is whether to keep the £45,000 he currently has as cash or to make a longer-termcommitment and invest some of it. Given that he wishes to expand his business over the next five years and part of this plan would beto move house/business premises, then there is great sense in simply maintaining the £45,000 as cash. The rates of return onbuilding society accounts aren't fantastic, but the flexibility this gives means that he can use that money when he needs it.

If Mr Newsome were to look at stockmarket-based investments then he will need to take at least a five-year view. He therefore needsto decide how much of the £45,000 is going to be used over the coming years for the business/house move. If he feels therewould then be a spare £5,000-£10,000 this might be used. In this case I would suggest that he considers an ISA(Individual Savings Account) because of its tax-free status. Mr Newsome has expressed an interest in higher-risk type investments. Ifeel that the Fidelity ISA would be suitable and through this he could select its South East Asia, UK Special Situations and AmericanSpecial Situations funds to build up a more aggressive portfolio.

He shouldn't pay back part of the mortgage because that would mean spending capital which couldn't then be used to build thebusiness. What he may wish to consider is a flexible mortgage. This would mean that the available cash could be put into a "mortgageaccount", reducing the outstanding mortgage by that sum. However, the actual mortgage is maintained at £106,000 and themoney is still available if Mr Newsome decides to use it for business expansion.

The benefit is that the interest charged on the outstanding loan is reduced. It would rise if he took the money out to buy a property, butit is a means by which the mortgage could be reduced and flexibility retained.

Mr Newsome has a personal pension into which he makes a regular contribution and lump-sum payments as and when the monies areavailable. This obviously gives him the flexibility that he wishes. As he becomes a higher-rate taxpayer, the tax advantage of thepension contributions gets greater and therefore becomes a more efficient investment. For the present, I would leave the pension as itis and concentrate on the business.

As the business expands, Mr Newsome will have more money to invest and he could look at regular savings plans or accumulatecapital and then make lump-sum purchases. The key to building a portfolio in this manner is to ensure that it remains structured. Forexample, the first £1,000 is used to buy into the Henderson Technology investment trust. With the next £1,000 he couldpurchase Martin Currie Japan unit trust, and so on.

If, in due course, Mr Newsome really wanted to "spice up" his portfolio, then he could consider capital shares, which are "geared"investments that exaggerate movements on the market in both an upward and downward direction. Consequently they have enormouspotential to do very well; they do not provide an income and, because of their risk, are not suitable for everyone, but they areparticularly attractive investments.

One particular favourite is Jupiter Split which is available via a savings plan and lump-sum investment and whose performance hasbeen quite impressive this year, rising 17 per cent, whereas the FTSE100 index has returned 3.7 per cent. These are not for thefaint-hearted, but may suit Mr Newsome quite nicely in due course.

In summary, I would suggest that Mr Newsome considers the business expansion plans carefully and tries to ascertain how muchmoney is going to be required. Then look at holding that money in a flexible mortgage account. Scottish Widows offers an idealflexible mortgage.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Two christmas trees ,Moonbeam (2L), Moonchester (2R) and Santa Claus outside the Etihad Stadium
footballAll the action from today's games
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drink
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas