All Things Finance

Unfair Markets: Reducing Your Risk on the Wrong Side of a Trade

Wed, 25 Mar 2026 11:15:31 GMT

Recent headlines have been hard to ignore. Reports of half a billion dollars in oil trades placed just minutes before a major geopolitical announcement have left many investors feeling one thing: the game is rigged. When markets move sharply on news and some participants appear to act just before that news breaks, it raises a difficult question: Is the market really a level playing field?

In the short term, the honest answer is: no, it isn’t always fair. However, that doesn’t mean you shouldn't participate in capital markets as it has been a great wealth generating machine over the long term. The more vital question for your financial future is: Do you actually need a "perfect" market to succeed?

The Myth of the Perfectly Fair Market

Financial markets are often sold as efficient and transparent. In reality, especially during volatile periods like the current energy crisis, information is unevenly distributed.

Access: Information can flow to a select few before it reaches the public.
Speed: Large institutions move in milliseconds.
Volatility: Liquidity can vanish exactly when you need it most.

Trying to compete in that short-term arena is not just difficult, it is unnecessary.

Our Strategy: Step Out of the Game

We recognise that a tiny fraction of global participants will always have access to insider information, while others, supported by massive computing power and millisecond-level access are built entirely around reacting to headlines instantly.

However, for the vast majority of investors, attempting to compete in that arena is a losing game. We don't believe that sustainable, long-term wealth is found by trying to outrun those approach, systems and machines. Instead, our approach is guided by one firm principle: The less you rely on timing, the less vulnerable you are to those who have a short-term informational edge.

Minimise Trading: The "Orchard" Shield

Think of the market like a local fruit stall. Some participants are there every day, trying to "flip" bags of oranges based on the latest rumours, hoping to sell them for a quick profit a few hours later.

Every time you make a trade like this, just as you were at the stall every single day buying and selling bags of oranges, your chances of accidentally buying a "lemon" (a bag of bruised fruit that the seller knows is damaged before you do) goes up purely because of the frequency of your exposure.

The "Insider" Edge: When someone with better information trades, they are looking for a counterparty to take the other side of their bet. If you are constantly trading in response to the news, you are more likely to be the one who unknowingly accepts that "bruised" deal.

The Shield: By trading less, you decrease the number of times you enter the fray. You stop trying to flip bags for a daily profit and instead invest in the entire orchard .

When you own the trees, it doesn’t matter who is frantically swapping bags of oranges at the stall because of a morning headline. You aren't the person on the other side of their "perfectly timed" trade. You are focused on the growth of the trees over the next decade, a natural process that an insider cannot speed up or steal from you.

A Disciplined Framework

Systematic over Reactive: Portfolios shouldn't be adjusted based on headlines. We manage through pre-defined processes—regular contributions/withdrawals and planned rebalancing.
Broad Diversification: Short-term distortions usually concentrate in individual stocks, sectors, or event-driven trades. Global diversification dilutes the impact of any single anomaly.
Focus on Fundamentals: Over time, economic growth, corporate earnings, interest rates, and productivity truly drives long-term returns. These forces matter far more over time than any short-term informational advantage.

The Overlooked Risk: Liquidity Under Stress

When markets get "thin," some investments become "opaque." During stress, buy/sell spreads can widen so significantly that even if you are "right" about the direction, the cost of the trade eats your profit. We deliberately avoid complex or illiquid instruments that might trap you when volatility spikes. It is a risk many investors underestimate, and one we actively seek to avoid.

Your True Edge

The real "edge" for most investors isn't having better information; it's having better behaviour. While others are trying to win a sprint based on today’s news, you are winning a marathon based on these pillars:

Time Horizon: You have the luxury of patience. While a short-term trader might be ruined by a single week of "unfair" volatility, you measure success in years/decades. This allows you to wait out the "noise" of the daily news cycle.
Structure: You have a pre-set plan for when things "get weird." By having a defined strategy for rebalancing and risk management, you aren't forced to make a panicked guess when a headline breaks.
Discipline: This is the ability to do nothing when everyone else is reacting. You don't let a single 15-minute price swing derail a ten-year financial plan.
Tax Efficiency: Your edge comes from strategic planning, not reaction. This includes:
Tax Relief: Maximising government incentives (like pension tax relief) that provide an immediate "boost" to your capital before it's even invested.
Tax Wrappers: Selecting the right combination of tax-efficient "buckets" to protect your returns from unnecessary taxation, allowing your wealth to compound more effectively.
Allowance Timing: Proactively using your annual allowances each year so they aren't lost, rather than reacting to market moves.
Asset Location: Ensuring the right investments are held in the right tax buckets (wrappers) to minimise the long-term tax take on your specific types of return.
Behaviour: Ultimately, the greatest threat to your portfolio isn't an insider in a far-off city; it’s the urge to react to them. Mastering your own emotions is a far more reliable "edge" than trying to master the news cycle.

There are effectively two markets operating at all times

The Short-Term Market: Fast-moving, headline-driven, and prone to "insider" timing.
The Long-Term Market: Driven by global productivity and rewards for patience.

Our approach is to spend as little time as possible in the first, and as much time as possible in the second. We don’t try to outmanoeuvre the few who are more informed. Instead, we build a process designed so that their short-term moves simply don't matter or matter less.

We would love to work with you to create a balanced portfolio. Get in touch with the Iron Wealth team and together we can create a plan, help you stay the course and enable you to reach your financial goals.

Risk Warnings:

The information contained in this article is intended solely for information purposes only and does not constitute advice. The price of investments and the income derived from them can go down as well as up, and investors may not get back the amount they invested. Past performance is not necessarily a guide to future performance.

From FAANGs to Granolas: Why Investors Love a Good-Sounding Trend

Mon, 14 Jul 2025 09:52:57 GMT

In the world of investing, there is always something trending and receives a lot of attention.

Although I look youthful, over the past few decades, I’ve seen my fair share of these trends come and go. Here’s a list I’ve come up with:

Gold & Silver
Commodities & Forestry
Gamestop
Student lets
Crypto
Currency trading
Asian tiger shares
Dot com stocks
Commercial property
BRICS / Emerging markets
Work From Home stocks - Peloton, Zoom, DocuSign
Solar & Wind
Electric vehicles
Shortcut to long term returns - stock grouping like Nifty Fifty (50 popular U.S. growth stocks starting in the 1970s), FAANGs (Five dominant U.S. tech stocks), Magnificent Seven (7 mega-cap tech names) and Granolas (A group of European giants in healthcare, luxury, and tech).

These themes often ride a wave of hype, and spark fear of missing out, but the excitement rarely lasts.

The Speculative Urge

It’s completely natural to feel the “itch” when everyone seems to be profiting from a trend. However, if you’re tempted to pursue speculative opportunities, these should be carefully ring-fenced, with very strict risk controls.

A sensible rule of thumb? Limit speculative assets to no more than 10% of your net worth and even that’s quite bold.

We’ve mentioned this before, but if you are seeking higher potential returns, you have to accept higher volatility. You should consider increasing your risk appetite. If you want a portfolio beyond 100% equity, consider responsibly increasing leverage into your financial plan.

Understanding the “Lottery Effect”

Why do investors like speculative investments? The answer often lies in what’s known as the “lottery effect”. When hopes and dreams of extraordinary gains are for sale, people overpay. These hopes and dreams are encouraged by “confirmation bias”, we hear about the spectacular successes, but not about the overwhelmingly larger number of losses. It's similar to someone claiming they had a winning strategy after hitting the jackpot.

Our Investment Philosophy

Rather than chase trends, our approach is rooted in global diversification—across sectors, geographies, and asset classes. This strategy naturally provides measured exposure to both current and future investment themes, without overcommitting to any one area.

We design portfolios aligned with your long-term goals and risk profile, ensuring a resilient foundation that weathers cycles and avoids unnecessary volatility.

Two Paths

To illustrate the point, consider two relatively extreme scenarios. In the first option, you invest £1m entirely into highly volatile assets like AI stocks and cryptocurrency. In the second, you instead borrow an additional £1m, using a loan with stable, fixed repayments and with no sudden demands of repayment—giving you £2m of total market exposure through a diversified portfolio. Personally, I’d choose the second option.

While both approaches involve higher risk, the second offers a far better balance of volatility, drawdown management, and recovery potential. It’s a more disciplined path to enhancing returns, rather than relying on the uncertainty of a single or few high-risk investments.

Familiar Names

Single stocks can experience a wide range of outcomes, and historically, only about 21.4% [Source: Dimensional, from CRSP/Compustat. US stocks with full monthly data; delists 200–399 = good, 400+ = bad. Outperformance vs. value-weighted market. Stats averaged over rolling multiyear period] of them both survive and outperform the market over a 20-year period. In contrast, a well-diversified portfolio is more likely to deliver consistent exposure to market returns over time.

These familiar names once commanded headlines, but they serve as reminders of how even well-known companies can underperform the wider market.

AT&T
Peloton
General electric
Nokia
Intel
Kodak
Zoom

Key Takeaways

It’s not about which investment or sector is "best." – It’s about what's already priced into the market. The more hyped an investment is, the more likely future returns are diminished and how each decision to your portfolio aligns with your broader financial plan within the context of your personal risk tolerance, time horizon, and overall strategy.
Your portfolio should be designed to prevent you from being scared out of the market. It should be built with discipline, resilience, and long-term thinking in mind—so you can stay invested through both calm and storm.

 Risk Warnings:

Invest for your future: The Crucial Benefits of Early and Consistent Investing

Tue, 11 Jun 2024 10:14:00 GMT

Balancing Cash Reserves and Investments: Why Strategic Investing Beats Hoarding Cash

We've been taught to save for a rainy day, which is wise to some extent. However, keeping all your money in cash over the medium to long term carries risks, too. In fact, doing nothing with your money is the biggest risk of all, as inflation will erode its value over time.

The amount of cash to hold as an emergency fund depends on individual circumstances. Generally, we recommend holding 3 to 12 months’ worth of living expenses. Any more can drag down your overall investment performance. For instance, a couple with two independent income sources, each capable of sustaining household expenses, plus having various protections like life and income insurance, might comfortably hold 3 months’ worth of expenses in cash. On the other hand, a single person with dependents, only one income, no protection plan, and no capacity for short-term lifestyle adjustments, might need 12 to 18 months’ worth of expenses.

Regardless of the risk profile you adopt, committing to regular investments will reap substantial future benefits, thanks to the power of compounding. People should treat regular investing for retirement like paying a mortgage. Under normal circumstances, missing a mortgage payment isn't an option, and the same mindset should apply to investments. It’s easy to reduce or pause monthly investments for temptations like holidays or new cars, simply because it is convenient to do so, but that isn’t an option with your lender, so why should it be a reason to stop investing for your future?

Here’s an illustrative example: an individual invests £1,000.00 a month for 20 years. With a total investment of £241,000.00 (the monthly £1,000.00 remains fixed despite inflation reducing its real value over time), the final value of the investment, at assumed 3%, 5% & 8% returns are significantly higher than the original investment amount due to compounded growth. For example, an 8% return will produce a lump sum of £577,145.78, representing a growth of £366,145.78.

This chart demonstrates the power of building wealth steadily and deliberately. Although not everyone has a 20-year investment plan, we often encounter individuals who still set aside excessive amounts of cash for a rainy day. Statistically, the need for such large reserves is limited. It’s a difficult topic, but it’s crucial to address the pitfalls of holding too much cash vs. the benefits of investing wisely and making sure you stick to it.

We are available to help you assess and maintain your existing portfolio, or build a new one. Get in touch with the Iron Wealth team and we can provide you with a structure, help you stay the course and enable you to reach your financial goals.

Risk Warnings:

We Are 5!

Tue, 28 Nov 2023 08:14:07 GMT

We are 5! This month we are celebrating Iron Wealth turning 5 years old. We are so ever thankful for everything we have achieved.

I (this is Helen, by the way) have therefore decided to write my first blog post, to share a little of our journey so far!

Tony is not big on celebrations, so we almost let it slip by, but I insisted we would do a little something, so that we can stop for a moment and reflect on how far we have come and celebrate the things, big and small, that happened along the way that have shaped who we are.

The team marked this fantastic milestone over a glass of bubbly and a lovely Chinese lunch, but I thought it would be good to share 5 highlights and 5 lessons we learnt along the way! So here goes:

5 Highlights

1. Completing our garden office build

2. Retraining into the Financial Industry - working towards and qualifying as a Mortgage & Protection adviser

3. Completing my Regulated Financial Diploma and officially qualifying as a Financial Adviser

4. Growing the team and seeing how everyone grow into their roles

5. Adapting to COVID: Installation of our pergola so that we can have garden meetings & lovely Korean BBQs too

Stepping into the role of an entrepreneur

With God’s faith and a bit of patience, we managed to get authorised after 7 months. I always thought it would take a decade or so for me to get up to speed, especially when Tony could hit the ground running with his finance degree, living and breathing in the financial industry for 10 years plus at that point, I did feel a little unprepared. We both left our employed roles and chucked ourselves in the deep end. Over the years, from building our brand to making a website, running the business alongside each other has taught me that I have an equal part to Tony, it’s not just “his business”, we have an equal role in leading it where we want it to be. Although I know I have still got so much more to learn, we are confident that together we can steer IWM to where we want it to be; which is helping more families get financially organised, work towards a comfortable retirement and have a good relationship with money.

5 Lessons learnt

1. Learning can be fun

I always thought I am not a fan of challenges, but every time I am challenged, I realised that I actually quite enjoy all the research and learning (not at the time obviously!), and how to overcome something. If anything, I now know how to source timber, how to apply a house wrap for insulation purposes, and how to fit a rubber roof lol!

2. Importance of taking a break

We get so busy with our work and personal lives that we often feel very overwhelmed and not having much breathing room. Tony and I have both learnt that it is paramount to take a break. It allows us to clear our head space and feel recharged. Having had some time out, we would come back with a different perspective, allowing us to make the necessary improvements. As the quote goes “It is important to make sure we fill our own cups first so that we have enough to pour into others!”.

3. Embrace Failure & learn from it

Yes, we make mistakes, it would be abnormal to not make any as entrepreneurs, but mistakes are what help us learn, and learning means growing. I have learnt the importance to reflect, in doing so, we create better ideas and processes, so that we can improve our services and delivery of our advice. Knowing what to do next time when we come to these challenges puts us in a better place, and we get more efficient with what we do!

4. Luck is what happens when preparation and persistence meet opportunity

We are always looking for ways to improve, as a bit of a perfectionist (both me and Tony), we hardly ever settle on the first answer we get. But this tenacity also means that we are digging deeper, looking further and planning for most eventualities. We have both embraced that there is always something new to learn and discover. And hopefully with this attitude, we can stay resilient, find innovative ways of financial planning and adapt to the ever-changing environment.

5. Believing in our financial planning superpower

I genuinely feel that being passionate about what we believe in, and what we do, is our superpower. We are grateful for all our client referrals, which continues to be the greatest channel of growth for our business. And we hope to keep providing the best service possible to our amazing families.

Last of all, we just want to say a big thank you to all our clients who have entrusted us with their financial plans. We hope that Iron Wealth can continue to have a positive impact on others, and we look forward to what the next half a decade will bring!

All the best, from Helen & the IWM team

Cash isn’t all it is hyped up to be, even at 5%

tj.yip@hotmail.com (Tony Yip) — Wed, 15 Nov 2023 11:32:20 GMT

We are noticing more and more queries asking whether it is worth switching to cash. It is tempting to cash in your chips (switch risk assets into cash) and wait it out until things recover, as “this time it feels different”. It is becoming a very real dilemma for a few investors.

Moving to cash is an option that we would not usually recommend. The only circumstance it would make sense, is if you need the funds to spend or gift within the next 12 months or so. Cash is a poor asset choice for medium (meaning 3 + years) to long term (5+ years) goals because the chances of it keeping pace with inflation is extremely low. More importantly, if we look back at historic data, during periods of high interest rate environments, risk-based assets have delivered even higher returns, meaning as risk free assets (cash) increase its return, so have risk based assets.

By Land or By Air

We can really relate to this analogy – You are waiting in the departure lounge for your 3 hour flight to your favoured holiday destination, hearing the news there will be a potential 2 hour delay. Will booking a taxi and the train get you there quicker? If the answer is yes, then you should move your assets to cash.

Taxis & trains are for short journeys and aeroplanes are for longer journeys, hence cash vs equities. If you aren’t shortening your journey, then wait in the departure lounge for your flight to be called. The general consensus is that interest rates are either peaking or have peaked. If this is true, 5.00% cash interest return is unlikely to be available in say 12 months. Assuming interest rates do start to fall, at that point, you either have to accept a lower interest rate on cash or start investing in risk assets again. However, what will happen to risk assets between now and the point you reinvest your cash savings? Evidence tells us financial assets will outperform cash over the medium to long term (and most short-term periods too).

The Correct Portfolio Mix

It is hard to stay seated sometimes, even when the captain tells you to. This is why one of the simplest ways to stay invested is by creating a portfolio that you would be willing and able to hold during both bull (a market where prices are rising or expected to rise) and bear (opposite to a bull market) markets. Something that we would have considered very carefully before implementing your financial plan. The whole point is to find a portfolio mix that can help you sleep at night whilst being mindful that risk is necessary for most people to achieve their goals.

Long-term investors will, dare I say always, have a higher probability of success than short-term investors. The longer your time horizon, the better your odds are at seeing positive outcomes. A high probability for success based on historical returns is no guarantee but we truly believe there are no better alternatives. Trust the markets, resist a sell off and focus on your medium to long term destination.

We are available to help you assess and maintain your existing portfolio, or build a new one. Get in touch with the Iron Wealth team and we can provide you with a structure, help you stay the course and enable you to reach your financial goals.

Risk Warnings:

Autumn Statement: The Impact on Unsheltered Portfolios

Thu, 24 Nov 2022 15:05:28 GMT

There is no better time to size your unsheltered portfolio correctly. Once you’ve filled up you tax efficient accounts (e.g. ISA & Pension), an unsheltered account gives you flexibility and uncapped investment amounts.

The chancellor has unleashed sweeping tax rises, a complete opposite to the mini budget in September 2022. This blog post relates to personal finances, not macroeconomics or how we should balance government books following their recent negative effect on the economy. Here’s a quick summary to the Autumn statement released in relation to Capital Gains Tax (CGT) & dividends:

CGT

10.00% for basic rate taxpayers and 20.00% for higher/additional rate taxpayers, no changes were announced to these rates in the Autumn Statement. The CGT annual allowance for all UK taxpayers is to be reduced from £12,300.00 to £6,000.00 from April 2023, and then to £3,000.00 from April 2024.

Dividends

8.75% for basic rate taxpayers; 33.75% for higher rate taxpayers; and 39.35% for additional rate taxpayers, no changes were announced to these rates in the Autumn Statement. The annual allowance for dividends will reduce from £2,000.00 to £1,000.00 from April 2023, and then to £500.00 from April 2024.

With these changes, here are some points to consider (in no particular order):

These changes won’t come in until 4 / 16 months’ time, the option to downsize your portfolio is still available. For some, there is still up to 3x ISA subscription allowances (up to £60,000.00) to take advantage of.
Depending on how long you have been investing and whether you have been managing your portfolio each tax year (by trimming unrealised gains), you may have unrealised losses given the falls in asset prices over the past 12 months.
As each & every portfolio is constructed differently, the return profile will also differ. It is important to understand the different components of expected returns in order to more accurately calculate the income/gains within the exemption/allowance. For example, in an 60/40 (60% stocks and 40% bonds) unsheltered portfolio with a value of £250,000.00, you may receive the following expected returns (weighted):
Interest - 1.00%
Dividends - 1.50%
Capital Gains - 3.50%
Total - 6.00%

Assuming you are a basic rate taxpayer, according to the rates effective April 24, you would therefore expect £3,750.00 of dividends and £8,750.00 of capital gains. £284.38 (8.75%) would be due on the dividends and £575.00 (10.00%) on the capital gains. An equivalent tax rate of 6.88%.

Your overall level of taxable income is very important. For example, if your total earnings are £40,000.00 per tax year, you will have £10,270.00 within basic rate tax band and any gains and dividends over the exemption/allowance would be subject to 10.00% CGT & 8.75% dividend income tax.
For those who are already higher rate taxpayer or pushed into the higher rate tax, then you may wish to consider investing in alternative tax wrappers or investments that are exempt from capital gains/dividends income tax.
There is no longer a relief for holding assets over the long term to counter the impact of inflation. It is fair to say that most assets generally increase by itself due to inflation and the high annual exemption amount (AEA) of £12,300.00 was seen as a way to counter the adverse impact of inflation. The reduction in the AEA penalises those who have held assets for the long term and have not been managing the unrealised gains within their portfolio. The reduction of the AEA is potentially the most serious change for long term investors.

In summary, investors are penalised and will pay more tax. Sizing your investment right becomes more important within an unsheltered portfolio. But if this is managed carefully, preferably keeping all income/gains within basic rate tax, then 10.00%/8.75% taxation should not deter you from investing for the long term.

Risk Warnings:

Market Corrections – Are They Temporary?

Thu, 24 Feb 2022 15:51:07 GMT

Market Corrections – Are They Temporary?

Fact: They are rare, inevitable and are a feature of the markets.

When there is a correction, there are only 2 options you have with your investment portfolio(s)

Do something
Do nothing

In life, doing something typically leads to better outcomes. For example, work harder, you are more productive, study harder at school and you get better grades, etc. Investing doesn’t tend to work like this in fact. It is counterintuitive. The odds are stacked against you if you keep tinkering with things, mainly because:

Increased charges – both explicit and implicit ones.
The best trading days occur infrequently, so missing out on the best days will heavily determine the outcome of your portfolio.
The best trading days normally occur after a correction.

These make timing the markets in real-time extremely difficult.

Here are some of the Don’ts that investors should avoid during a correction:

Forgetting their investment time horizon – investing should be measured over years not months. If you do not sell an asset, it is just a paper loss. It only becomes real if you sell.
Forgetting their risk profile – you have to accept that markets do not just go up in a straight line, there will be occasional periods where they will go down. Depending on your risk profile, you have to be prepared for the level of investment drawdown over a given period.
Failing to understand liquidity. Liquidity is a double edged sword. Financial assets have a unique feature that almost no other asset class have, that is liquidity. There is transparency around the pricing of the financial assets and the frequency to trade is seconds, if not daily. You have got to recognise this feature and make good use of the flexibility it brings. With this level of transparency, it inherently brings volatility. Some clients have told us that they check their portfolios every few days and I know it is those clients that tend to react whenever the markets experience a small tumble.
Failing to stick to your financial plan.
Thinking that “this time it’s different”. Just bring up a total return index chart, where dividends are factored in. One example is the German DAX. We have had wars, financial crises, terrorist attacks and a global health pandemic, all causing significant disruptions. In how your portfolio & financial plan is designed, you should be confident that the odds are stacked hugely in your favour. Where there is a wobble, there will be an imminent bull market (a market where prices are rising or expected to rise) within the capital markets.
Failing to realise that bear markets (a market where prices are falling or expected to fall) are getting shorter – You will see that gains are stretched over many years and losses compressed into a few months. It’s short-term pain for long-term gain.
Failing to recognise that what you see in the media where they reference for example, the FTSE 100 index, this may not be how your portfolio is constructed. It should be far more diversified and appropriately blended to achieve a good level of risk-adjusted return for a particular risk level.
Failing to diversify.
Failing to understand defensive assets exist as a form of protection, rather than a driver of returns. A bad year for defensive assets is akin to a bad afternoon for equities.

Risk Warnings:

The information contained in this article is intended solely for information purposes only and does not constitute advice. The price of investments and the in come derived from them can go down as well as up, and investors may not get back the amount they invested. Past performance is not necessarily a guide to future performance.

Unlocking Property Wealth

Wed, 17 Nov 2021 10:55:57 GMT

An Alternative Source of Income/Capital: Equity Release & Retirement Mortgage

Are you 55 or over, own a property (with or without a mortgage) and would like to explore whether you can free up some money from your property to either help:

Have a comfortable lifestyle in retirement
Home improvements
Improve your tax efficiency
Bless your loved ones
Repay an existing mortgage

Whether you are gearing up for retirement or already in retirement, accessing property wealth could be a key solution for a growing number of homeowners. Equity release or a mortgage could be the right solution considering that we are in a low interest rate environment. With inflation (CPI) set to soar to as much as 5% by spring 2022, this could be an opportune time to unlock your property wealth. RPI is already at 6%. RPI almost always gives a higher figure for inflation than CPI does. Lots of payments are linked to inflation – pensions, benefits, and index-linked bonds. The higher the inflation figure, the higher the payments. We’re not here to argue which is more accurate but to highlight that lots of expenditures are linked to the higher RPI (think train fare hikes and student loan repayments) whilst some government benefits are linked to the lower CPI. Higher inflation rates tend to lead to higher interest rates in the future. It is therefore sensible to take this opportunity to lock into a low interest rate that is fixed for life. Equity release can do that for you if the circumstances and objectives are right.

As with most things in life, there are various advantages and disadvantages and it is important to understand how best to make use of a certain financial tool that fits around your financial plan which considers your personal objective and circumstances.

Lenders will carry out an affordability assessment and this process helps establish if you can afford to repay the loan over the term of the loan. In terms of affordability checks, equity release is more flexible. Unlike a standard mortgage, providers of equity release adopt a non-prescriptive attitude to what a client requires the money for. However, on the flip side, equity release tends to be costlier if you wanted to repay the loan early.

As a member of the Equity Release Council, we adhere to a set of principles that ensure you are offered the best protection when it comes to Equity Release. We offer truly holistic solutions to suit most customer needs. Coupled with our independent advice, you will be fully informed to achieve an outcome that suits your objectives and circumstances.

If you would like to know more, please get in touch with us for a free initial consultation about equity release or retirement mortgage, where we can discuss your releasing equity needs / retirement plan and answer any questions you may have. Call 01908 382168 or email us at info@ironwealth.co.uk and we would love to see how we can help.

Risk Warnings:

The Perils of Chasing Yield

Wed, 26 May 2021 11:10:21 GMT

What does it all mean?

A common question that you may have heard or asked is “What is the income/yield?” But have you truly thought about the meaning of this question?

Firstly, what do they mean by “yield”? Yield is what you get back from your investment, the interest or dividend you receive.

Many people like the thought of a stable, sustainable income and therefore, they focus on obtaining a high income. This is especially true for those approaching and/or in retirement.

After Years of earning a regular income through our wages, we are bias towards continuing this approach with our pensions and investments. This is another reason why most people would opt for an income stream in the form of a final salary pension over a lump sum. We saw an example of this when Camelot launched ‘set for life’ in 2019, where instead of winning the jackpot as a lump sum, the winner would receive £10,000 a month for life.

A lump sum has its benefits too, it gives us flexibility, control, inflation proofing and the ability to manage counterparty risk (the probability of default). Of course, this all depends on individual circumstances and objectives. If you structure an investment portfolio for maximum income/yield only, or as your main objective, you distort the portfolio, leading to far higher risks and can potentially lead to higher taxation in the future.

Distorted Investment Portfolio

By focusing on yield, this often creates a distorted investment portfolio. It would mean positioning your portfolio to a particular market or investment type which exposes your portfolio to higher risk without it being obvious to you. Numerous studies point to persistently lower risk-adjusted returns, i.e., leads to poorer returns relative to the amount of risk taken on.

If you are already exposed to a similar level of risk as above, and wish to retain this level of risk, then the more favourable approach would be to build a diversified portfolio, then increasing the expected returns using leverage. This improves the expected risk-adjusted returns. Most investors choose concentration in particular sectors over the use of leverage because concentration feels more conventional and less risky. Most people do not understand leverage within an investment portfolio and it is therefore considered unsuitable for most. There is an inherent bias in most investors, most feel leverage for property investments to be acceptable, so why is it not for other investments? Like fire, leverage is an extremely powerful financial tool, if managed wisely.

Income Vs Capital gains

In addition to a distorted portfolio, focusing on a higher income may also lead to higher taxation. In general, capital gain tax rates are lower than income tax rates. The difference between income tax rates and capital gain tax rates makes drawing on capital each tax year very attractive as a form of ‘income’. This creates the need to build portfolios that can provide gains to draw down on, tax-efficiently in the future. Most individuals use up all their income tax allowances, mainly from salary, self-employed earnings, dividends and interest. If capital gains and income were more balanced, an individual might be able to fully use up their capital gains allowance each tax year.

Total Return Approach

M odern financial planning should be based on a total return approach, regardless of where the returns come from i.e., yield or capital growth. By focusing on total returns, your portfolio is structured to achieve broad diversification, better liquidity and inflation proofing, without exposing you to concentrated risk around particular sectors.

For personal advice on how to set out a portf olio that would work for you, we at Iron Wealth are here to help you reach your financial goals.

 Risk Warnings:

Redundancy - A Blessing In Disguise?

Fri, 23 Oct 2020 09:59:23 GMT

As the impact of COVID continues to adversely affect business, it looks like further redundancies are inevitable. This may sound grim, but you can lessen the blow by getting financially prepared.

For those who are still in employment and are facing potential redundancy, sometimes it helps to take a step back to see the bigger picture. Here are some questions that you can ask yourself?

1. Are you ready to take early retirement?

2. If not, how quickly can you get another job and at what pay?

3. How big is the carrot?

4. Do you want to retire now or do you want to tie this in with your partner?

5. Are you in good health?

6. What do you have planned for retirement? i.e. if it is travelling the world, then probably not the right time

7. What’s the job security like for your partner?

Time to devise a Plan B

The first port of call should be your emergency reserves, which is what they are designed for, to replace an income that typically covers 3 to 6 months. Once you have had time to review your overall finances, you should look at drawing from pots in the right order, mainly to minimise tax.

For those who are 55+, pensions and equity release may be suitable options. But just because these are available, you need to consider these carefully because there are multiple facets to consider.

What is the tax treatment of redundancy pay?

This next section looks at how redundancy packages are taxed and the wider impact on other benefits and tax allowance. We’ll also look at the main tax planning strategy that can help maximise your wealth and minimise your tax.

The maximum statutory redundancy pay is £16,140. This is the minimum. Many firms offer enhanced terms to seek volunteers.

Here’s a summary of the different elements and how they are taxed:

Therefore, a redundancy package under £30k does not mean it is 100% tax free. Once you have this breakdown, you can analyse how best to plan around maximising your redundancy pay. The potential pitfalls include:

Tax Rates – a large one-off payment could push you into the next tax bracket which subsequently affects the taxation of other form of income types.
Personal Allowance – will the payment cause you to lose your personal allowance.
Child benefits – will the payment cause you or your partner to lose your entitlement to child benefit.
Annual allowance – will the redundancy payment affect your annual allowance.

A tax planning strategy could be to use part, or all, of your redundancy payments as an investment into a registered pension scheme. This will attract valuable tax relief.

It is worth noting that those who currently pay pension contributions before any tax is deducted, it is important to clarify if the redundancy package on offer is based on pre/post salary exchange.

Going through redundancy can be a difficult time for many people. But, equally, for some, it can be a blessing in disguise; a welcome cash injection that could mean retirement plans can be brought forward or savings boosted if they are able to secure other source(s) of income. With the right tax planning, those retirement and savings goals could be accelerated.

At Iron Wealth, we can help you navigate the next steps. We will maximise the efficiency of your sequencing. Whatever your financial objectives, we will help you get there quicker.

Risk Warnings:

Moving the goal post again – pension age increasing to 57!

Thu, 03 Sep 2020 21:51:42 GMT

The government has confirmed that the minimum pension age is increasing from 55 to 57 in 2028 and we suspect there will be further increases. This can be seen as both good and bad news, but for us, we mainly see this as bad news for those without a financial plan. Those currently 48 or over are safe from this change. Pensions can be an extremely powerful shelter for your wealth but only if the circumstances are right. To be fair, the government doesn’t always amend pension legislation negatively, for example, a change in April this year has improved the annual allowance limit for high earners. This change has little effect for those under 30, as it is unlikely that they would have accumulated a big pension pot. But for those in their early 40’s, who have based their retirement plan on a target retirement age of 55 would be particularly impacted. There will be no transitional rules that protects existing pension assets already saved.

Flexibility is the key when building your financial plan as it allows you to take advantage of the various planning opportunities available. Just like the benefits of liquidity in an investment portfolio (see our earlier blog post https://www.ironwealth.co.uk/liquidity-an-important-consideration-of-portfolio-management )

Nothing is static, so your financial plan should be flexible enough to cope with the changes that are still unknown. It should evolve with legislative changes, as well as changes in your circumstance. Diversification is not just an important strategy for investments, it also makes sense when it comes to tax planning. Using too few solutions for both income/capital and estate planning can cost you greatly. This is a very timely reminder that retirement/investment planning should not always consist of just one pot, just because it is the widely adopted way. Having multiple pots to draw on, each with its own tax treatment, gives you far greater scope to optimise tax efficiency and accessibility.

If you would like to understand more about how we adopt a multiple pot approach, or how your current financial plan measures up in terms of flexibility, we would be more than happy to help.

Risk Warnings:

COVID-19 Lockdown – Protect Yourself & Your Portfolio

Tue, 24 Mar 2020 22:54:22 GMT

The Prime Minister has ordered everyone to stay indoors as of last night, I thought as we embrace this new way of living, it would be good to share our thoughts and experience to help you navigate through this crisis, that's the best we can do. With our experience and knowledge, we will tell you exactly how it is.

When you are in a crisis, you tend to behave irrationally. You panic and will most likely make wrong choices. This irrationality is exacerbated further when your ability to earn is in danger.

All Crisis Pass

I know everybody's situation is different, but all crisis will pass. In the context of your financial plan (which is normally over decades), you will look back as if this crisis did not matter. If you have a long-term view, you did not invest on the basis that you need all of the money back out when the markets fall. The markets will recover, it is a question of when, but we do not know when. The markets could fall further, or it could recover over the coming months. If the market declines further it does not mean investing today was the wrong thing to do. It just means you did not pick the bottom, i.e. buying at the lowest possible point, anticipating a re-bound. The odds are against you picking the bottom and even if you can do this, it is impossible to do it consistently. Our focus now, should be taking control of our own emotional reaction to market ups and downs.

This isn’t about committing new funds, or picking a riskier portfolio, this is about staying on course. This isn’t about betting on a single company share, this is believing that capitalism will continue to work by investing in a portfolio that is well diversified and structured.

For those who need to draw on their investments, this might be a bad time. We call this ‘Sequence risk’, i.e. drawing too much capital in market downturns. The answer might be to postpone or reduce withdrawals until markets improve; or have a dynamic withdrawal strategy in place, i.e. target specific investments that have either retained its value or have appreciated in value.

The Yo Yo of the markets

Global markets have fallen, some predicting a recession and that normally takes many months for people’s confidence to come back. Cities are in lock down and people cannot spend (the demand is frozen). Our view is, once the crisis is over, there should be pent-up demand. People should be going out spending (who wouldn't after a long period of confinement!) and the market should recover. The key question is how long will it take for the crisis to resolve?

Shifting Behaviour

Most people would agree that it is far easier to spend money than to save money so with the lockdown, even if you are earning less, most should realise that they end up saving more. Spending less and saving more are definitely good habits to get into and you may realise that when the economy is in crisis, there is a powerful shift in our thinking and behaviour. We all tend to pick up more sensible financial habits.

Keep well and stay safe. This may be the best opportunity to invest in quality time spent with family and loved ones. Let's believe in rainbows and we will come through this stronger!

Risk Warnings:

The information contained in this article is intended solely for information purposes only and does not constitute advice. The price of investments and the income derived from them can go down as well as up, and investors may not get back the amount they invested. Past performa nce is not necessarily a guide to future performance.

Liquidity – An important consideration of portfolio management

Thu, 27 Feb 2020 20:51:47 GMT

The idea of Liquidity

In a world where there are a multitude of investment options, one of the most important consideration is often overlooked. When an investment portfolio is being constructed, it is important to consider different aspects. One well understood consideration is diversification. The idea that you shouldn’t hold all your eggs in one basket is an easy concept to grasp. Liquidity is another important consideration and it sounds kind of complicated, so we’re here to simplify it.

What is Liquidity

If an asset is liquid, it can be converted into cash relatively quickly without affecting the price. Conversely, if an asset is illiquid, it takes longer to sell and/or it is harder to sell without affecting the price (negatively) significantly. For example, it takes a while to complete on a house purchase/sale, therefore, properties are considered as an illiquid asset class.

There is another aspect to liquidity that is not really ever mentioned, that being the ability to sell a proportion of an asset. For example, if you wanted to raise £10,000.00 from your property to pay for a holiday, it would not normally make sense to capital raise this amount from your house. Whereas, if you had an investment portfolio (invested in liquid funds), you can realise the funds within days/weeks.

The Problems of Illiquidity

When times are good, liquidity is not so much of a concern, but when it’s bad, everyone will start to focus on liquidity. If you need the cash for whatever reason, you will either have to wait, or accept a lower price which does not reflect their value (both outcomes are not ideal!). It is important that you strike the right balance, but to do that, you need to understand the liquidity of different assets available and how they are structured (e.g. whether there are any unlisted holdings*).

Some investors believe that there is a premium for holding illiquid assets, in other words, you are rewarded extra because there is an additional layer of risk. At Iron Wealth Management, we place a lot of emphasis on daily liquidity and we do not see that premium. That is, a premium that comes with lack of transparency around pricing of assets, and a possibility of lock down during a liquidity crunch. We therefore don’t believe there is any value in holding illiquid funds given the disadvantages of this asset class.

If you would like to understand more about how we construct our portfolios, or how your current portfolio measures up in terms of liquidity, along with other portfolio considerations, we would be more than happy to help.

*Unlisted holdings are company shares that are not available to general public for trading and not listed on a stock exchange, i.e. not traded on the open market. Unlisted holdings are classed as illiquid investments.

Risk Warnings:

How will Markets Fare in 2020?

Sun, 12 Jan 2020 17:12:05 GMT

The Market has No Memory From Year to Year

I was catching up with a client very recently and he asked what were my thoughts for the markets in 2020? Well, just like flipping a coin, the market has no memory from year to year. If head comes up 10 times, what’s the chance of head coming up again? That is not to say that investing is the same as flipping a coin, with a 50/50 chance that you’ll have a positive or negative return in any particular year.

If we look at every January, there are predictions on how the markets will fare in that particular calendar year. Take last year (2019) as an example, it started with many anxious, gloomy predictions with sentiment carried over from 2018, as it was a bad year overall in 2018. Contrary to the apprehensive predictions, although our portfolios were negative across the range for 2018, in 2019 we saw returns between 8.40% to 20.86% (before platform and advisory fees). Some investors decided to sell to cash and wait for prices to go down even further. They thought after many years of high returns, they would time the market (i.e. to sell and buy back when the time is right). The problem with market timing on a diversified portfolio is that you have to time every single asset class right. Not just when to sell, but when to re-buy. If you had 11 asset classes, you would have to be right 22 times - a very difficult game to play. Investors place far too much emphasis on trying to avoid the market falls but not enough on the recovery or gains. Missing out on big growth has as much impact on a portfolio as losing that amount.

The Key: Invest with a Long-time Horizon & Understand Your Portfolio

Two important messages. Firstly, investing is a long-term game, but what does that mean? There is plenty of research to support the probability of making real returns (i.e. net of inflation) increases as you hold investments for longer, e.g. 5 plus years. You stack the odds more in your favour. Secondly, timing the market for a diversified portfolio is a dangerous game, instead, focus more on understanding how your portfolio is structured (how diversified, how much liquidity, fund type, how it is priced etc) and consider whether you are comfortable with how it behaves (i.e. the ups and downs) over the long term.

Chosen with Care

Each of our portfolios have a different aim of delivering a range of risk and return outcomes. They are well balanced, capable of absorbing a range of economic stresses. Our Portfolios were historically appropriate and built with a long-term knowledge of how the global markets operated. We help clients realise the difference between temporary volatility and permanent loss.

Successful investing is about having the right strategy to ensure you have long-term financial freedom.

Risk Warnings:

Want To Grow Your Net Worth?

Mon, 23 Sep 2019 16:20:30 GMT

If you want to grow your net worth, you are going to have to do things right, which can be uncomfortable.

1. Make Sacrifices - a Temporary Set Back could Lead to a More Prosperous Future

Spending less now may help to achieve two things:

Build an emergency pot of funds
Build up surplus income / capital for anything else

The amount to save will vary depending on your preferred lifestyle, on a joint/single income and whether you already have access to readily available funds. As a rule of thumb, we advise on putting away six months’ worth of expenses. Saving as much of your income as possible is a good start, but it’ll only get you so far- therefore it’s a good idea to start planning early and consider investing your surplus funds.

Not every season is a harvest one, but resisting short term temptations will help to reap future gains.

2. Shake Up Your Finances

For those already with assets/wealth, you can consider shaking up your finances. Sometimes you can maximise your overall wealth by simply restructuring your assets, mainly driven by sensible taxation planning. For example,

By simply structuring debt correctly (not all debt can be classified as bad)
Converting income to capital gains (income tax tends to be higher than capital gains tax)
Utilising tax relief

3. Hoist Your Sail to Capture those Winds (Returns)

To truly maximise your income/capital’s potential, you’re going to have to do more than keeping it in a savings account.

For instance, a £100,000.00 savings in a current account may attract 0.5% return (we are being very generous here), will result in a guaranteed loss once we factor in inflation which is currently running at 1.7% (August 2019 CPI). However, for the very short term, savings accounts are okay. For a longer investment time horizon, it can be sensible to split your investments into retirement and non-retirement pots. An investment account that allows you to contribute and withdraw from will give you flexibility.

Investing comes with risk, but so is avoiding it, in the sense that your wealth may not keep up with inflation. There are plenty of empirical data that supports long-term patient investing, generates real positive returns with far more certainty than investing over a short period of time, say a year.

Next Steps

No matter where you are at your wealth building journey, it’s never too late to make a start. Taking baby steps is better than not trying at all. Start planning now, and by doing so you may be able to retire earlier, go on nicer holidays (who doesn’t want that?), have a better future planned for your family or buy that dream house / car.

Risk Warnings:

All Things Finance

Unfair Markets: Reducing Your Risk on the Wrong Side of a Trade

The Myth of the Perfectly Fair Market

Our Strategy: Step Out of the Game

Minimise Trading: The "Orchard" Shield

A Disciplined Framework

The Overlooked Risk: Liquidity Under Stress

Your True Edge

There are effectively two markets operating at all times

From FAANGs to Granolas: Why Investors Love a Good-Sounding Trend

In the world of investing, there is always something trending and receives a lot of attention.

The Speculative Urge

Understanding the “Lottery Effect”

Our Investment Philosophy

Two Paths

Familiar Names

Key Takeaways

Invest for your future: The Crucial Benefits of Early and Consistent Investing

Balancing Cash Reserves and Investments: Why Strategic Investing Beats Hoarding Cash

We Are 5!

We are 5! This month we are celebrating Iron Wealth turning 5 years old. We are so ever thankful for everything we have achieved.

I (this is Helen, by the way) have therefore decided to write my first blog post, to share a little of our journey so far!

Tony is not big on celebrations, so we almost let it slip by, but I insisted we would do a little something, so that we can stop for a moment and reflect on how far we have come and celebrate the things, big and small, that happened along the way that have shaped who we are.

The team marked this fantastic milestone over a glass of bubbly and a lovely Chinese lunch, but I thought it would be good to share 5 highlights and 5 lessons we learnt along the way! So here goes:

5 Highlights

Stepping into the role of an entrepreneur ﻿

5 Lessons learnt

Last of all, we just want to say a big thank you to all our clients who have entrusted us with their financial plans. We hope that Iron Wealth can continue to have a positive impact on others, and we look forward to what the next half a decade will bring!

All the best, from Helen & the IWM team

Cash isn’t all it is hyped up to be, even at 5%

We are noticing more and more queries asking whether it is worth switching to cash. It is tempting to cash in your chips (switch risk assets into cash) and wait it out until things recover, as “this time it feels different”. It is becoming a very real dilemma for a few investors.

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By Land or By Air

The Correct Portfolio Mix

We are available to help you assess and maintain your existing portfolio, or build a new one. Get in touch with the Iron Wealth team and we can provide you with a structure, help you stay the course and enable you to reach your financial goals.

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Autumn Statement: The Impact on Unsheltered Portfolios

There is no better time to size your unsheltered portfolio correctly. Once you’ve filled up you tax efficient accounts (e.g. ISA & Pension), an unsheltered account gives you flexibility and uncapped investment amounts.

Market Corrections – Are They Temporary?

Market Corrections – Are They Temporary?

Unlocking Property Wealth

An Alternative Source of Income/Capital: ﻿ Equity Release & Retirement Mortgage

The Perils of Chasing Yield

What does it all mean?

Distorted Investment Portfolio

Income Vs Capital gains

Total Return Approach

Redundancy - A Blessing In Disguise?

Time to devise a Plan B

What is the tax treatment of redundancy pay?

Moving the goal post again – pension age increasing to 57!

COVID-19 Lockdown – Protect Yourself & Your Portfolio

All Crisis Pass

The Yo Yo of the markets

Shifting Behaviour

Liquidity – An important consideration of portfolio management

The idea of Liquidity

What is Liquidity

The Problems of Illiquidity

How will Markets Fare in 2020?

The Market has No Memory From Year to Year

The Key: Invest with a Long-time Horizon & Understand Your Portfolio

Chosen with Care

Want To Grow Your Net Worth?

If you want to grow your net worth, you are going to have to do things right, which can be uncomfortable.

Stepping into the role of an entrepreneur

An Alternative Source of Income/Capital: Equity Release & Retirement Mortgage