Making plans for growth
Saturday 14 August 1999
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.
And why are 'southern' ways of speaking spreading north?
life + styleClarissa Baldwin is the brains behind the slogan 'A Dog is for Life not just for Christmas'
£1,430,000,000,000 (that's £1.43 trillion): Britain's personal debt timebomb
Banks are brought to account by switchers as growing number of people expect to be rewarded by their bank
Stock market: Looking for value left out there?
How to start your own internet business
Five ways to make money on the internet
- 1 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 2 A forgotten episode in Russian history leaves links with the Philippines
- 3 Scientists sequence oldest human DNA from fossilised leg bone found in Spain
- 4 Cannabis can cause man boobs, US surgeon claims
- 5 Joanna Lumley’s garden bridge over the Thames gets £30m seal of approval from Government
iJobs Money & Business
£50000 - £65000 per annum + benefits + bonus: Harrington Starr: Market Data SM...
£50000 - £70000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£70000 - £85000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£75000 - £85000 per annum + Bonus and Benefits: Harrington Starr: An award win...
Day In a Page
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000
A two-bedroom split-level flat with stunning south-west facing roof terrace in the popular Brondesbury Conservation Area, £549,950.
A charming 16th century, three-bedroom detached house in Bidborough with picturesque garden
A top-floor one-bedroom flat in the heart of Pimlico with a terrace providing spectacular views over London, £495,000.