What opportunities does the current situation present?
Whilst all around us is a steadily increasing level of fear and panic, it is easy to slip into a negative mindset and give up on everything. Understandably, many people are having a miserable time. Whether their holidays have been ruined or something more severe has happened, it is certainly hard to look for positives.
Fortunately, for many people, this situation has in fact created some fantastic opportunities. As many people choose to wallow in a pit of doom, the savvy amongst us will be seizing these opportunities, and using this crisis as a financial spring board into the coming decade.
What are the best opportunities right now?
1. Discounted investments
As many people review their portfolio and see that it has suffered over the last 2 weeks, dismay will inevitably creep in. Although it may seem counter intuitive, if you are fortunate enough to have cash, now is the best time to put more in. It is not possible to know if we are at the bottom of this downturn and some people may be holding off for when they think the worst has come, but this is a dangerous strategy, as the chances are they will miss it. A better strategy would be to steadily deploy as much capital into the markets as possible over the coming months.
A good way to think about the current market situation is as if it is a high street sale and currently, everything is 30% off. If you don’t have cash as all your investments were placed prior to this situation, sit tight as it will pass. Your portfolio may be down but unless you sell out of the investments, these losses are not solidified.
How long should I leave it there?
As stated earlier, it is not possible to time the market and therefore, a long-term outlook is always better. The current situation is unprecedented, so we can’t be sure what will happen. However, previous market crashes can give us a good indication of the likely situation to follow. It is also worth noting that, unlike some previous crashes, this financial crash was not triggered by fundamental problems in financial institutions. Typically, ‘black swan’ events such as these, recover much quicker than in the instance the crash is caused by market related factors or data.
What’s the best way to get involved?
Getting set up with a platform to invest from is quick and easy and can be up and ready to go, with funds successfully deposited, in less than a week. These are low cost solutions with a wide range of investments available within them. Our in-house team of analysts create industry leading portfolios to suit any clients profile.
2. Weak pound
Many people perceive a weak currency as a negative across the board. It seems for the layman this perception is driven mostly by the cost of their holiday expenditure going up and a beer in Spain now costing more than last year. There is in fact an array of positives from having a weak currency too. Exports become cheaper, which has a substantial effect given Britain exports more high value and luxury goods than it does disposable consumerables. Conversely, Imports become more expensive, which does drive inflation up, but also makes local produce more competitive and can lead to an increase in output for local producers.
For Brits living abroad and earning in foreign currencies, this is especially positive. If you earn in USD or a USD pegged currency, then you have just received a 12% pay rise since January. Many Brits are already scrambling to send money home to pay off mortgages and other outstanding debt they just got a discount on. People investing into the UK property market from abroad also just benefited from a massive discount and we have seen the demand for UK property investments rise dramatically.
If you would like to make the most of the current exchange rate, our in-house foreign exchange experts are perfectly placed to assist you. Using a bank is an expensive way of transferring funds. Using a specialist broker can save you up to 5% on the transfer by mitigating expensive transaction fees and offering a better exchange rate than the banks do.
Get in touch with us to speak to a specialist foreign exchange broker.
3. Lowest interest rates of all time
In response to the market sell off, the Bank of England has set interest rates at a historic low of 0.10%. Those with certain types of mortgages just received a discount on their repayments and people looking to get a mortgage in the UK are now in better position than ever. This combined with the weak pound, creates a fantastic time for expats to invest into UK property.
Our property partners, Britannia Global Property, have some fantastic opportunities for UK property investments, with entry prices starting under £100,000. Backed up by our in-house expat mortgage advisor, everything you need can be done in one place, making the investment process effortless. There has never been a better time for expats or foreign nationals to invest into UK property.
4. The perfect storm for pension transfers
Lower interest rates lead to lower gilt yields. This is significant because it is gilt yields that are typically used to calculate the liability of final salary pension schemes. With gilt yields at all-time lows, the cash value of future pension liabilities is at an all-time high.
This has two significant consequences.
Firstly, for individuals with defined benefit (final salary) pensions it means that the capital value (or cash equivalent transfer value) of their future income will likely be the highest it has ever been. In the current climate this could mean that individuals would be offered a sum significantly more than the annual income on offer in later life. The benefit of this can be compounded by the ability to then buy into a heavily discounted market which has been so heavily sold in recent weeks. The ability to cash in at such significant valuations and then invest into a market so far below recent highs is unique in financial history.
If you have private pensions in the UK, now is not the time for sitting on the sidelines. Get in touch with an advisor today, get a valuation and make a smart informed decision as to what to do with them.
Coming out the other side of this pandemic and being able to say that you made smart decisions and benefited in this time, will have a massive effect on your outlook moving forward and your memories looking back. Instead of being a victim of circumstance, you will be a winner against adversity. Instead of memories of a dark and miserable time with nothing but loss, they could be of a time when you made hay while the sun shined. Play the circumstances rather than allowing them to play you.