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Wealth Management

POST-LOCKDOWN PREDICTIONS FOR THE ECONOMY: TIPS FOR INVESTORS

Speaking back in April, economist Gertjan Vlieghe from the Bank of England broke the bad news that we knew was coming;

We are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries.”

Since then, businesses have struggled to stay afloat, the FTSE 100 has fallen by 24% over three months and without a vaccine or cure for the virus, the future remains uncertain.

With this in mind, what should you do about your investments? Is now the perfect time to invest or should you cut your losses and sell?

Let’s find out.

 

Imogen Clarke

Stick to your long-term plan

Despite how concerned you might feel right now, the worst thing you can do is pull your money out of your investments. Ride out the storm and you are more than likely to see the market recover and your money grow in value once again.

“The best course of action is for investors to be disciplined, and approach any investing in a normal systematic way, no matter how nerve-racking it might currently feel,” agrees Julian Broom, Chief Investment Officer at The Fry Group.

You see, the stock market has always been volatile. Markets can grow and decline at a rapid pace. The good news for you as an investor is that after all the previous market crashes seen in the past 100 years, the market has grown again.

So stick to your long-term investment plan as before and have faith.

 

Drip feed your investments

Now is the perfect time to invest in the stock market as the prices are so low. However, it’s impossible for anyone to predict if markets have already hit the bottom or if they’ll drop further as we emerge from the lockdown.

Therefore, with such unstable markets, it’s important to take a ‘slowly, slowly’ approach and invest a small amount every month.

This will allow you to buy more units when prices are low and fewer when prices are high, so you can ride out the volatility.

 

Look for quality when you buy

Many new investors look for the cheapest stocks when prices are low this like and presume that it means they’ll have guaranteed growth when the markets pick up again.

Unfortunately, it’s not quite this straightforward.

The world economy has been shaken to its core over the last few months and consumer behaviour has changed beyond all recognition.

Even top-performing businesses and industries like Rolls-Royce, Airbus, Virgin Atlantic and EasyJet have been impacted and have struggled under the additional financial pressure.

Therefore, before making any new investments, check that the business in question wasn’t already in debt before the coronavirus hit.

“Investors should look for underlying quality before investing,” agrees UK investment media group, Investors Chronicle, “That also means assessing the individual holdings in a fund before buying it and avoiding those that are full of low-quality companies.”

 

Don’t rely on cash

You might find yourself wishing that you had stuck to lower-risk cash savings at times of crisis like these. However, cash certainly isn’t as safe at it seems.

The current UK base rate is a paltry 0.1%, which is lower than ever before in history. This means you’re getting close to zero return if you have your money in savings, so it’s not helping you to build a more solid financial future.

On top of that, the UK rate of inflation stands at 1.19% which is less than the base interest rate. This means that the value of your cash is actually falling if you have it in savings.

Even though the fluctuations of the market might make investment seem nerve-racking, it’s a better choice over the medium term than cash.

Review your portfolio

It’s a great time to review your portfolio and make sure your investments are diverse enough to help you protect your money whilst also reflecting your attitude to risk.

Review your goals, consider your current financial situation and consider how you could make improvements.

  • Have your investments provided the average returns you or your financial planner predicted?
  • Could you allocate more of your cash reserve to an ISA, pension or other investment packages?
  • Could you diversify across different markets?
  • Could you switch your investments more towards new and growing markets such as gaming, digital communication and digital learning?

 

Summary

Although the market has been hard hit by the coronavirus, the future is bright when it comes to investing.

Stick to your long-term plan, review your allocations, and drip feed your investments and you are highly likely to see your investments grow again.

Wealth Management

SIMPLIFYING THE RETIREMENT FUND DEATH CLAIMS PROCESS

By Dolana Conco, Regional Executive at Alexander Forbes

 

Losing a loved one is one of the most difficult experiences a person can go through, and during this difficult time, you don’t want your loved ones to have to worry about finances.

Your family will receive a share of your retirement savings and a life insurance pay-out if you die while being a member of a retirement fund. The trustees of the fund have a legal responsibility to make sure that death benefits from the fund are paid to those who are financially dependent on you.

If your death benefit is through a policy that is separate to the fund, then the trustees will not be involved and this benefit will be paid out according to the nomination of beneficiaries’ form that you’ve completed with that specific insurer, or else your employer will decide.

 

What retirement fund members need to do

  1. Keep your ‘Who needs financial support when I die?’ form up to date

This form is so much more important than anyone thinks – even though it is not a last will and testament. The trustees must, by law, find all the people who are financially dependent on you, as well as those whom you love and would want to leave a portion of your death benefit to when you die. Those who depend on you for financial survival are called your dependants. Examples are your spouse or life partner, children (of any age), parents, people you need to pay maintenance to or anyone else in your life who depends on you financially.

If no one is financially dependent on you in any way, you can choose someone else as a beneficiary (family, friend, or even a charity). If you choose to give your death benefit to a charity when you die, the money will first be paid to your estate and then paid over to the charity of your choice. If this form is not up to date, it could take the trustees much longer to identify who should receive a share of your death benefit from the fund.

 

  1. Submit the correct documents

The most common reason for delays in paying an insured death claim is that there are missing, incomplete or incorrect documents submitted with the claim. Your employer can assist with what is needed and can check that the form has been completed fully and correctly before submission. In general, the following information is needed:

  • a certified copy of the death certificate
  • the identity document or passport of the deceased member
  • a copy of a pension-backed housing loan (if applicable)
  • proof of the extent of any financial dependency of the beneficiaries

What your retirement fund needs to do

The trustees of your fund have a legal duty when you die to distribute your death benefit from and through the fund. The trustees must find all dependants and nominees to decide how to share the retirement savings and life insurance pay-out fairly. To make a fair decision, the trustees will consider the following factors, among others:

  1. Age of the beneficiaries
  2. Relationship to the deceased
  3. How financially dependent they were on the deceased
  4. Their financial affairs
  5. Their future earning potential and prospects
  6. The total amount of the retirement saving to be distributed

The trustees can choose to give a beneficiary no pay-out, as the law doesn’t say that every beneficiary must get some money. However, they must consider the needs of each beneficiary and the amount available for distribution.

If there’s information that the trustees may not have considered when they made their decision and the draft resolution has already been prepared, your family needs to contact the trustees urgently. The fund’s administrators will pay the death claim once they get a response from all beneficiaries, or if no response has been received within 30 days of sending the draft resolution document.

There are various reasons for delays in paying a death claim from or through the fund, including the employer not completing the claim form in full, missing or incorrect documents, investigations for the trustee resolution taking longer than expected, outstanding tax issues and beneficiaries not providing their bank account details.

Make sure your family knows what can go wrong and what to do to make the process run smoothly – it all plays a part in leaving a legacy that you can be proud of.

 

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THE COMPLETE GUIDE TO TRANSFERRING SHARES FROM ONE DEMAT ACCOUNT TO ANOTHER

A Demat Account functions like a savings bank account with the obvious difference in the fact it stores stocks instead of money. To be similar to a savings account also implies that a Demat Account can be used to transfer shares from one Demat Account to another Demat or trading account.

Shares are generally transferred from one Demat Account to another for the purpose of changing depositories. However, there can also be other reasons for transferring shares such as merging the investments in different Demat Accounts in a single Demat Account.

Whatever the reason, in order to understand how to transfer shares from Demat Account, it is important to first understand what is Demat Account.

What Is Demat Account?

The most simplified way of answering what is Demat Account is to understand it as a digital platform where investors can store all their shares and other forms of investment in an electronic form. Demat is a short form for dematerialization which refers to the process of converting physical share certificates into the electronic form. A Demat Account can only be opened with the help of a Depository Participant or DP and a depository. A DP is an agent or broker who acts as an intermediary between the depository and investor. A depository is a financial institution in which investors open their Demat Account. Read more about what is Demat Account to understand it in more thorough details.

It is necessary to know about Demat Accounts before attempting other things like transferring shares, etc.

 

How To Transfer Shares From Demat Account

After the meaning of what is Demat Account is cleared, it is time to understand how to transfer shares from Demat Account to another Demat Account. There are two types of transfer:

  • Intra-depository transfer: In this type of transfer, shares are transferred from one Demat Account to another in the same depository.
  • Inter-depository transfer: In inter-depository transfer, shares are conveyed from one Demat Account to another account which is in a different depository.

The two ways in which shares can be transferred are the manual procedure or online procedure.

 

Manual Transfer Of Shares

For the manual transfer of shares, investors are required to ask for delivery instruction slip or DIS from their brokers or DPs. DIS is not just an important but also an integral part of the manual transfer of shares. It contains some mandatory fields which have to be filled to process the transfer of shares.

1.    Beneficiary Owner ID (BO ID)

Beneficiary owner ID (BO ID) refers to a 16-digit ID number of a broker. An investor has to mention in DIS the IDs of both the current broker and the broker to which the shares will be transferred.

2.    International Securities Identification Number (ISIN)

International Securities Identification Number or as it is commonly known ISIN is a unique ID number appropriated to each share of an investor which he holds in a Demat Account. In order for the transfer to take place, ISIN has to be provided to designate which particular shares are to be transferred.

3.    Inter or Intra

This is the distinctive part of DIS where an investor has to choose whether to make an intra-depository or inter-depository transfer. In the case of intra-depository transfer, the column denoted as ‘off-market transfer’ has to be selected. Whereas, in the case of inter-depository transfer, the column designated ‘inter-depository’ has to be selected. An investor should be extra careful while filling this part of DIS.

4.    Signature

Little needs to be said about this part of DIS. Just like any other important document, DIS too needs to be signed. Once an investor has signed DIS, it should be submitted to the broker.

A broker may charge a small fee for the transfer of shares. It usually takes 3-5 business days for the shares to be transferred.

 

Online Transfer of Shares

Central Depository Services Limited (CDSL) has made the online transfer of shares a very easy process. All that an investor has to do is to follow these simple steps.

  1. The ‘Register Online’ option at the CDSL website has to be selected.
  2. There would appear an option called EASIEST which then has to be selected.
  3. A form would generate which accordingly has to be filled.
  4. Once the form fill-up is complete, a print out of the same has to be taken out. This print out is to be submitted to the account holder’s Depository Participant.
  5. The DP will verify the document and once the verification process is completed, a password will be generated.

Using this password, an investor can log in and transfer shares on his own.

Thus, the two ways in which shares can be transferred from one Demat Account to another is not at all complex and can be easily achieved through both manual and online procedure. With a proper understanding of what is Demat Account and how the transfer of shares takes place, an investor can effectively send the shares to another account either on his own or through the help of a DP.

 

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