by The Investor
on March 22, 2010
With income taxes rising and pension reliefs being curbed for those on six-figure salaries, the UK’s high-earners are looking again at Venture Capital Trusts (VCTs).
Just this weekend there was this article on VCTs in The Sunday Times, and another in the Financial Times.
I won’t go exhaustively into the case for VCTs. If you’re not familiar with Venture Capital Trusts then please pop off and read those articles.
Don’t worry. We’ll wait.
Back? Great – you now know the main points:
- VCTs are a special class of investment trust, with shares traded on the London Stock Exchange
- New issues offer 30% initial income tax relief
- Five-year holding period to qualify
- Tax-free dividends
- Your fund manager is usually investing in small, riskier companies but the risks are spread across several dozen holdings, as with a standard investment trust. (There are other kinds of VCTs, but that’s the main gist).
In this article, I’ll focus instead on some of the risks of VCT investing that I think are often underplayed in these articles.
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by The Investor
on March 20, 2010
Todays’s blog of the week post comes from Tim of the ever erudite Psy-Fi blog.
Guest posting at Simoleon Sense, Tim (Richards, as we now discover) gives a whirlwind tour of behavioral investing and inefficient markets.
He points out that contrary to the nomenclature, the buying opportunity of a lifetime is a poorly named cliche – unless investing is to be dominated by ten-year olds.
From the Great Crash to World War 2 to the oil crisis in the 1970s to Black Monday in 1987, massive market dislocations actually seem to come around every ten years.
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by The Investor
on March 19, 2010
A lot of people say they want to earn more money, but when you talk to them in a few years time they’re not doing any better.
Most people don’t actually want to be rich. Certainly not enough to do whatever it takes to get there.
There’s no shame in that. Being wealthy has its downsides, and there’s much more to life than money.
Some people are too lazy to earn more money. They say they want to increase their salary, but they’re not actually prepared to do the extra work or take on the responsibility required.
Or else it’s not the very real risks of starting a business that holds them back, but inertia. They sit in front of their PC night after night ‘researching’, but there’s always just one more website to read, or one more funny pet video on YouTube.
Such people may also fear making the changes in themselves that are required to earn more money.
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by The Investor
on March 17, 2010
I believe cash is king of the asset classes, which might come as a surprise given that I most often talk about investing in equities (by buying shares in companies).
But equities are a necessary evil that come with big downsides:
- There’s relatively high costs involved in buying and trading equities, even in cheap index funds.
- If you buy individual shares you can lose all your investment (though this risk is easily avoided by using an index tracker or an ETF portfolio).
The case for investing in equities is that over long periods in the UK (and even more so in the U.S.), equities have beaten the returns from all other asset classes.
But investing isn’t just about getting the highest returns.
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