Money Insider: Low rates drive savers to take risks with investments
Saturday 05 February 2011
this week RBS launched two new managed funds aimed at those fed up with the paltry returns they can get at the moment through traditional savings accounts. The new funds are available for investments from as little as £1,000 and one is labeled Cautious Managed and the other Balanced Managed.
With cash savings accounts offering such poor returns for the last two years, it is no surprise to learn from the underlying RBS research that more than 1.2 million people who have never previously invested in equity-based products may now be tempted to do so. Let's face it, anyone checking their savings account statements should be thinking hard about what they can do in order to try to obtain a better return on their savings. But while people are free to do what they wish with their savings, I think it's essential that they seek guidance from an independent financial adviser who can explain in layman's terms the potential risks they face in their pursuit of better returns.
Equity-based investments are in the main medium to long-term products and consumers, particularly novice investors unsued to the fluctuations of the stock market, need to fully understand that their capital may not be 100 per cent guaranteed. Unfortunately there is always the danger that novice investors plump for a fund because of the reassuring description they see on the tin.
To highlight the fact that a product name shouldn't be the reason to invest in a particular fund, in a recent FSA consultation document, the regulator reminds financial advisers not to rely on the name of the fund as proof of a particular risk profile, but requires advisers to look at the investment strategy (and understand it).
While I'm not endorsing the new RBS products, I like the fact that the volatility of these funds will be managed on a daily basis, and that the volatility will be maintained within a narrow band – a maximum of 10 per cent for the Cautious fund while the Managed fund is between 10 per cent to 15 per cent.
However, it is worrying that the volatility of funds within funds with the same label, such as Cautious or Balanced, can vary so widely and is another area that advisers and the regulator need to look at more closely.
With adverse headlines relating to non cash investments from the likes of Barclays and Norwich & Peterborough Building Society in recent months, there will undoubtedly be some fear among cash savers who will always be prepared to accept a much lower return in the knowledge that their cash is safe.
Although cautious and managed investments have the potential to provide superior returns when compared with a cash savings account, the element of risk is the crucial piece of information that an adviser should fully understand and be able to communicate clearly to his client. Investors, by the same token, need to understand when it may be worth taking and risk and when they should stick with safer, albeit potentially lower, returns.
Lloyds TSB offers hope to would-be home movers
There has quite rightly been a focus on the plight of first-time buyers in the UK and the hurdles they have to face, not only in having to raise a massive 10 per cent to 20 per cent deposit, but also finding a bank or building society that will approve their application for finance.
However it's not just the wannabe home owners who are finding the going tough – people in a similar position who were lucky enough to get on the property ladder three or four years ago are now trapped in their current home because a fall in property values means the equity in their home is very small and in some cases is in a negative position.
Many of these people have done nothing wrong – they have kept up their mortgage payments as per their contract with their lender, it's just that economic factors outside of their control, ie falling house prices, have gone against them. Lloyds TSB has recognised the plight of these people they call "second steppers" and has launched an equity support initiative to help.
Under the terms of the scheme, existing customers are able to move to a more expensive property as long as they pay the difference from their own funds. For example someone with a £110,000 property and a £130,000 mortgage (loan to value 118 per cent) could move to a property costing £120,000 if they are in a position to pay the additional £10,000.
This will help some move to a larger property to accommodate a growing family. By injecting the extra £10,000 in this example, both the borrower and the lender are in a stronger position as the loan to value is cut to 108 per cent.
Similarly if a borrower with little or negative equity wants to relocate to another property for work purposes, they will now be able to do so under the Lloyds equity support scheme. While this isn't going to unlock the bottleneck in the housing market, it is the sort of forward thinking that we need to see more of to get the property market moving during 2011.
Andrew Hagger is an analyst at Moneynet.co.uk
Independent Partners: See how much you could save by switching credit cards. Compare now
The magicians using online collaboration to push boundaries
Jennifer Lawrence attacks mass media again over body image
- 1 America's 'virgin births'? One in 200 mothers 'became pregnant without having sex'
- 2 Sun will 'flip upside down' within weeks, says Nasa
- 4 Christmas comes early: Justin Bieber is 'retiring from music'
- 5 Children evacuated from swimming pool after prosthetic leg mistaken for paedophile
Exclusive: Young people ‘want UK to stay in Europe’: Four in 10 adults aged 18 to 24 are ‘firmly in favour’ of membership, poll shows
You can STILL be jailed for being a republican, government confirms, and it remains illegal to even 'imagine' overthrowing the Queen
Kiss and yell: Italian protester charged with sexual assault after kissing riot police officer
Fighting back: the woman giving a voice (and 49,999 others) to the victims of sexism - by giving an airing to their horror stories
PM denies two child limit for benefits is part of Tory welfare policy
UK evangelist says Tom Daley ‘is gay because his father died’
- < Previous
- Next >
iJobs Money & Business
£60000 - £75000 per annum + Bonus and Benefits: Harrington Starr: A leading au...
£25000 - £32000 per annum: Harrington Starr: Junior Business Analyst - Banking...
£25000 - £35000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£50000 - £75000 per annum + benefits + bonus: Harrington Starr: Implementation...
Day In a Page
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
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.