All hail John Redwood! Nicknamed ‘The Vulcan’ for his resemblance to a certain pointy-eared space elf, the MP for Wokingham is arguing against the Capital Gains Tax rise.
Good for Spock. Clumsy attempts by Liberal Democrats in line for a gold-plated, six-figure pension to judge what’s ‘fair’ with respect to investing cut little ice with me. I doubt most of them have ever risked more than the £10 they put into the ‘How Long Will Vince Cable Last?’ office sweepstake.
The mother of a girl I was once vaguely involved with saw me lustfully admiring her… antique furniture.
(You were worried for a moment there, weren’t you? She was a handsome woman, but I only had eyes for her daughter.)
Back then, I couldn’t really tell art deco from Art Garfunkel. The nearest I got to owning furniture was a Habitat mattress that I threw onto the honey-colored floorboards of the decaying Georgian townhouse I rented with friends.
“No matter darling!” she said. “We can’t all be so lucky. One day you’ll be very rich, and when you are you must promise me you’ll buy only antique furniture so your children will be rich, too!”
I’m still waiting to be very rich, and I’m afraid the only furniture I’ve bought in the 10 years or more since then was from Ikea (mainly because after a five-year standoff with the UK property market, I’m still renting).
Yet her advice has influenced me in thought if not action, especially as I’ve heard (and seen) it repeated elsewhere.
And when I finally do buy my own property, I’ll certainly choose antique furniture or classic design pieces whenever I possibly can.
There are several reasons to buy iconic or antique furniture:
This being Monevator, it’s that last factor we’re most interested in here. For all her refinement, it’s the reason why my ex-girlfriend’s mother was so keen on the old stuff, too.
Of course, I suspect she didn’t buy much of her own furniture, as is the tradition amongst old money. Who can forget the aristocratic MP Alan Clarke’s snobby put down of self-made Swansea-born millionaire Michael Heseltine:
“He had to buy his own furniture”.
I’ve no truck with that sort of elitism (not least because my roots are humble too!) but I think it’s a good idea to do what the rich do, from investing with the Rothchilds to keeping an eye on how they spend their money.
And they buy antique furniture, art, and collectibles because they have tended to at least hold their value in line with inflation, if not outperform.
Compare that to a table or bed from IKEA. While I think IKEA’s design know-how is underrated, the fact is you’ll be lucky to give away your flat-packed furniture after a couple of years.
Modern furniture is a consumable good, not an asset.
One source I’ve read about a few times is the Antique Furniture Index (AFI), which tracks the price of 1,400 typical (rather than exceptional) pieces of furniture.
According to this antique blog entry from 2008:
Standing at an initial value of 100 in 1968, the index peaked at 3492 in 2003, and today stands at 2942 [after] a ‘dramatic’ fall of 1% on 2007.
Historically, the AFI has tended to track, and sometimes even better, the fortunes of the stock market or house prices in the South of England. But since 2002, when the AFI registered the first of four consecutive years of correction, it did not keep pace with house prices in the South East.
The source includes the graph pictured right at this same low-resolution, which I presume has been scanned in from the AFI original.
If your eyes are good, you can see it shows the AFI tracking the FTSE 250 until 2007, then holding flat while the latter plummets. House price inflation (the green line) continues to do its gravity defying thing.
According to the Antiques Trade Gazette, since then things have got worse:
Hopes of a recovery in the value of antique furniture have been dealt a blow after the Antiques Collectors’ Club’s Annual Furniture Index (AFI) saw prices fall by seven per cent during 2009.
The biggest ever 12-month drop in the index, it reflects lukewarm bidding at auction and thin trading at retail outlets.
The AFI, which stood at 100 at its inception in 1968 and reached a historic high of 3492 points in 2003, moved downwards from 2942 to 2736, due to falls in all seven of its constituent indices.
It was last at this level in 1998.
It’s probably not surprising that antique furniture prices have fallen.
If I recall correctly, 2008 was the first time on record that the Sunday Times Rich List got notably poorer. The worldwide recession hit everyone, though the rich have since bounced back.
Some people believe that antique furniture is going out of fashion, but I think that’s unlikely. It’s true the masses of ‘dark wood’ furniture that used to clog up old English houses had to be shipped abroad to find bigger homes in the US, or was even chopped down to size.
But in a world where there’s ever more rich people and a finite supply of old stuff, I think antique furniture will prevail in the long term.
The blog I cited above gives an illustration of what’s possible:
We have a piece of furniture at the moment that was made in about 1760 and for all intents and purpose is a chest of drawers. This piece was sold to its previous owner in 1963 at the Grosvenor House Fair in London for £2,250.
It has been used every day for the last 40 odd years and we have just sold it on for 2,600% more than it was bought for in 1963. Try that with something contemporary!
I think the same will be true over the next 40 years, albeit with a few wobbles along the way.
A big perk of living in West London is the plethora of antique furniture dealers, as well as the famous Portabello Road market in Notting Hill. As a result of such fantasy shopping, I’ve grown frustrated I’m still renting my home!
I could start buying antique furniture now, but I’d rather wait until I’m finally in my own place. Renting and moving is cheap and fairly carefree. It won’t be the same when I need a truck and specialists to transport my beloved chairs, mirrors and wardrobes.
The enforced delay has also enabled me to develop an eye for what I like, and to get over the ‘sticker shock’ of some of the nicest pieces, which are invariably the ones that will best appreciate in value over time.
Everyone says that as with art you should buy furniture you like, as well as what will hold its value. Buying antique furniture isn’t like investing in shares or bonds – you actually have to live with this stuff!
There’s realms of information out there on choosing antique furniture, much of it pretty elitist. But this Telegraph article is packed full of useful tips on where and what furniture to buy.
I’ll keep looking for more information on antique furniture as an investment, such as this antique furniture market data from what seems to be a fund manager. But I’m not interested in investing in antique furniture as an asset class – rather as an alternative to throwing away money on modern stuff.
People looking for investment income home in on bad ideas like Premier League footballers sniffing out WAGs with loose morals.
Guided by bad advisers, they put their money into opaque structured products, bonds that aren’t really bonds, and all sorts of offshore nonsense.
Every month brings new tales of woe about the sorry results. One recent story The Independent on the ‘epidemic problem’ of investment bonds noted that:
Insurance giant Zurich received a dressing down from the ombudsman after an adviser encouraged a man to unnecessarily move £292,000 into an investment bond, which reportedly came with £17,500 in commission.
But while the products are not new, sky-high commissions continue to lure advisers into recommending bonds, although they are often inappropriate for the investor.
Not only do most bonds carry exit penalties for cancellation within five or six years, they are not always tax-efficient and carry risks which the investor may not be fully aware of.
Don’t be fooled. If you want safety, go for cash or government bonds. If you want a growing income, there’s no getting away from risk.
Incidentally, I’m still waiting for someone to complain that they were miss-sold a product that tripled in value when they only expected it to double.
Funnily enough, people only complain when the bonds do badly!
Of course, most reputable banks’ income bonds and guaranteed products do not blow up.
But you’re often still paying over the odds (probably to an advisor) for a mediocre return, and you may not be properly evaluating the risks, particularly if the bond was constructed with derivatives.
And the shame of it is we’ve a proven way of investing for a long-term growing income here in the UK – one that’s fairly transparent and based on enduring investment principles.
I’m talking about stock market listed income and growth investment trusts, which most experienced readers will know about already, I’d hope.
The pick of these trusts have paid regular dividends for decades, with the income rising annually for well over 20 years. The very best have grown their payouts for more than 40 years!
How do they do it?
Dividends: These investment trusts generate the income they pay to investors by investing in FTSE 350 companies that deliver a growing dividend income stream.
Gearing: Most use a bit of debt to increase their returns.
Reserves: By not paying out all their dividend income in the good years, trusts can build up ‘revenue reserves’ to top-up dividend payout in the bad years, and so smooth out the income stream they offer.
And that’s it. Nothing fancy – but it works.
The following four UK growth and income investment trusts have a dividend growth record spanning at least 20 consecutive years, according to their trade body, the AIC.
All boast generous dividend income yields at the time of writing:
| Investment Trust | Yield |
| Merchant’s Trust | 6.9% |
| Murray Income | 5.2% |
| City of London IT | 5.1% |
| Temple Bar | 4.5% |
The right column shows the current annual income yield for each trust
All four companies are generations old, and they manage – and are valued at – well over £1 billion combined. These are not fly-by-night outfits.
The longest period of rising income of my four picks has been achieved by the City of London Investment Trust, which has increased dividend payments annually for 43 years. (Despite this great record, in the recent bear market you could pick up the City of London trust at a 10% discount!)
There are other income-orientated trusts with a slightly less stellar record that are worth investigating, too. One is the Edinburgh Investment Trust, which is under the new-ish management of high-flying income investor Neil Woodford. It’s yielding nearly 5.5%.
There are also a few global and small cap investment trusts with decent yields that you might want to investigate to diversify your income stream.
If you divided your money between the four investment trusts above, you’d currently buy an attractive average investment income yield of 5.4%. You could reasonably hope that the income will rise over time, too.
With even the very best cash deposit accounts yielding barely 3% before tax (and most much less), that seems to me good value.
True, investment trusts carry annual fees, but they’re not onerous – typically around 0.35% to 0.5% for these giant trusts (although City of London does also charge a rather fiddly performance fee) – and the yields quoted are net of fees.
I’d also argue that investment trusts are pretty simple, compared to the alternatives we discussed at the start of this article.
Yet there’s no free lunch, either.
When you buy an investment trust, your capital is 100% at risk. These are companies listed on the stock market, investing in other companies. If markets go down, your trust will likely fall in value, too.
Now personally, I’d far prefer to put my money into a 50-year old investment trust than a structured product dreamed up by some Aussie maths nerd with a six-month work visa at Merrill Lynch.
But I guess I’m in the minority, given how investment trusts are the preserve of old school investors, and more people put money into not-really-bonds et al.
In fact, let’s defend financial advisers for a moment. While many do sell complicated products primarily because they pay great commissions, it’s also true their clients want the impossible – all reward, and no risk.
Most people can’t stand volatility, which is exactly what led to the creation of structured income products. They are an attempt to limit the downside, but at the cost of capping the upside in the best cases, and of mysterious failures or hidden charges in the worst.
In contrast, the risks of buying shares in an investment trust are clear:
To address the first case – falling income – this is a non-trivial risk, but I’d point to the record of increasing payments going back decades.
All four trusts I’ve cited have built up substantial reserves sufficient to offset a moderate level of falling dividend income from the companies they’ve invested in – generally over 100% of their entire annual payout.
As for their share prices, there’s no getting away from fluctuations here. But if you’re investing for the long-term for income, why should you care? What matters is the dividend.
If the market throws a wobbly and share prices halve or double, it shouldn’t matter unless the companies owned by your trust slash their dividend payments, sufficient to reduce your investment income.
Otherwise, as an income investor you can ride it out.
In fact, if you’ve got spare cash it could be an opportunity to buy more of your favourite trust, especially if its discount to Net Asset Value (NAV) has increased.
I’ve written before about how I am creating a freedom fund focused on investment income to replace my salary. Investment trusts will be a key part of the mix.
I already own shares in Merchant’s Trust, amongst others. Now that capital gains rules are being meddled with yet again, I think this trust with its attractively high income yield will get more of my money over the months and years ahead.
Please do read my article on investment trusts to ensure you understand the basics. You might also want to read up on how dividend income is taxed (it’s taxed less harshly than cash!)
Britain needs to reduce its £169 billion budget deficit. That means either more public spending cuts or an 8p rise in income tax.
Our annual tax take is already over 37% of GDP — it’s time to take public spending around the back of the House of Commons for a kicking.
Everyone has their own priorities, of course:
Sensible people – even rich ones who don’t want to live in a fortified bunker in Wales – believe there’s a middle road to public spending. Yet the past few years of drunken driving by Gordon Brown has seen us drift away from it.
Here’s a graphic of the UK’s public spending bill:
Click to enlarge the size of public spending (Source: Guardian)
Download this public sector spending graphic as a PDF
With a right-of-center coalition now in place and wielding the axe, it’s time to cut back, and to enable (or force) people to take responsibility for their own lives.
It’s also time for us bloggers to voice our personal public spending peeves!
In theory it’s great that 45% of young people now go to university, compared to 20% in 1980. In practice, too many are barely literate or numerate, and are doing pointless degrees. Worse, the graduate salary premium is disappearing, even as these students rack up more debt. I’d refocus public spending towards science, engineering, and maths, and ration social science and arts degrees.
Britain is no longer a global superpower. Yet our military spending of £57 billion is third highest in the world. We should posture within our means, and retain a cheap nuclear deterrent sufficient to blow up a half-a-dozen capital cities. If Canada and Spain can spend £15 billion, why can’t we?
Environment degradation due to over-population and over-consumption is my biggest fear. It’s therefore intolerable that I’m taxed so that middle class parents find having kids more affordable, and rich ones can give theirs extra ponies or a bigger first flat in Fulham. I’d scrap all child benefits for any household with an income over say £40,000 a year.
I don’t mind helping the working poor, but I don’t want to fund feckless layabouts to have kids at our expense. Then again, I don’t want innocent kids to suffer, either. How about some sort of tax clawback for non-working parents? In this scheme, child-related benefits would effectively be a loan, which is taxed back from the non-working parents (even out of their benefits) when their kids reach 18. Having children is a right, but you should pay for it.
Government spending on quangos is out of control. You don’t spend billions without achieving something, but I doubt it’s very efficient. The justification for quangos is that getting private enterprise and individuals involved means money is better directed. Here’s a different idea – get the State out of the way entirely and let private enterprise and market forces address needs directly. Government can set the rules with tax and regulation to tilt the playing field.
Why can’t public sector employees fund their pensions as they earn like everyone else? It seems an anachronistic hangover from the days when the State consisted of a few thousand Whitehall mandarins and everyone died at 60. Ideally the whole public/private pension system should be unified.
We spent nearly £2 billion on publicly funded legal services last year. Three-quarters of that would probably survive scrutiny, but paying anything to give legal aid to hoodlums who routinely terrorize neighborhoods is galling. Oh for an Australia to send them to. Unfortunately we can’t even deport known terrorists.
Enough roads already. I wouldn’t mind so much if they helped, but all the evidence is they don’t; build more roads and you get more congestion. Visit L.A. for evidence. Perhaps some new toll roads would be a fair compromise.
I used to think these were a myth until a much more right-wing friend started sending me Guardian adverts. It’s not just that these roles exist, or that they’re clearly created to appease liberal guilt. The pay is high, too, and the opportunity cost of having well-educated people involved in such nebulous careers is scary. Meanwhile, one lesbian kiss on a soap opera or Barack Obama’s election in the US achieves more for equality in a day than 1,000 of these non-jobs does in a decade.
I love Radio 4, I love the BBC’s news coverage, and though it never links to me I even love Robert Peston’s BBC blog. But it’s a joke that the licence fee costs £123 million to collect, when it’s a non-negotiable tax. It’s also ridiculous that this publicly-funded channel spends millions on Jonathan Ross and his ilk. I’d scale the BBC back to its radio output (I’d scrap Radio 1), a serious TV culture channel, and a news and current affairs channel. There’s a place for pop music, reality TV and dancing celebrities – it’s called the commercial sector, and it delivers it all without charging me.
Readers, what don’t you like paying taxes for? Get it off your chest below!
