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Making the most of your savings


For me, the answer to this lies in managing expectations, because there are a number of factors that need to be considered. Some are personal to each investor and others are about what we can expect from banks, stocks (equity) investments, or more traditional With Profits type of investments that offer smoothed investment returns.


Generally, we find that people want to maximise their investment growth, or create a regular income, without taking too much risk with their savings. This is totally understandable, because often, we are advising on life savings that can’t easily be replaced, especially for those that are retired. Here are a few points to think about when trying to make the most of your savings …


Have an honest and realistic discussion about expectations

 

The easiest thing in the world is to tell people what they want to hear.  However, my job is to gain a good understanding of what our clients want to achieve, within the level of volatility they are willing to accept.  There is no magic wand, it’s always a balancing act between the two.  Remember, if anyone promises guaranteed high returns, be on your guard … if it looks too good to be true, it probably is! 

 

Lets talk more about risk … riding those waves!

 

This is a big subject, not to be underestimated.  Risk could be anything from visiting a casino, buying crypto or just taking the next step and moving your savings from the bank/building society.  Risk can be referred to as the chance of losing everything, or the chance of your investment dipping through the normal ebs and flows of the markets … known as volatility (how much an investment might go up or down). 

 

With good diversification, using well established underlying investment funds, being mindful of changes to market conditions, and taking a long term view (five years or more) a discussion around risk becomes more about riding the waves along the way.  If you choose to stay in calm waters (what I call ‘steady Eddies’) there isn’t likely to be a lot of downward movement on your investment, but there isn’t likely to be a lot of upward movement either!  If you choose choppier water, the dips will be deeper, but riding that wave also offers the possibility of higher longer term rewards!  We find that our clients like a mix of the two, the ‘steady Eddies’ provide stability within a portfolio, with the inclusion of some tactical equity exposure to provide the potential for outperformance over the longer term.

 

What can you expect from different options

 

Lets look at some numbers.  If you are looking for a regular income, the chart below demonstrates how much you would have been able to take without eroding your capital over different periods of time with different levels of equity content.  It demonstrates the difference between staying in those calm waters, with a lower equity content (the first line), moving up a notch to slightly more adventurous investments (the second line) and into the ‘choppier water’ of a higher equity content (the third line).


Source: Prudential & FE Antalytic
Source: Prudential & FE Antalytic

Here is the same information in monetary terms … the monthly income available with different levels of equity content historically, without draining capital.  The higher the equity content, the higher the monthly income available over each period.


Source: Prudential & FE Antalytic
Source: Prudential & FE Antalytic

If you want stability within your portfolio, without losing out on the potential gains from including equities, diversification is key.  This will ensure that each underlying asset within your portfolio is contributing something different.

 

Regular Reviews

 

The story doesn’t end when you decide on the level of equity content you are happy with at the outset.  It’s important to regularly review, and at times, rebalance your portfolio to ensure that it remains within your remit when it comes to equity content. Employing the services of a well qualified, experienced and reliable Financial Planner can make all the difference.

 

Keeping savings in the bank

 

The alternative, of course, is to keep your savings in the bank.  Following the Global Financial Crisis, central banks in many major economies cut their interest rates close to zero (and into negative territory in some places).  Interest rates remained low for more than a decade until more recently soaring inflation became an issue, forcing policymakers to raise interest rates.

 

As interest rates rose, cash understandably became a much more enticing prospect, but that situation is now changing. Interest rates are slowly making their way down, resulting in many investors now gravitating back to the stock market. 

 

Whilst cash does have its place, over the longer term, equities historically offer the best inflation-beating returns.  For instance, US stocks (equities) have comfortably beaten cash returns since the year 1900 – despite US interest rates averaging 3% during this period.  (the US stock market has been referenced as data is available for a longer time period than other markets).

 

The following chart shows the difference between each asset mix (after inflation) from 1900 to 2020, with cash coming in as the lowest return at 0.1% pa after inflation.


Source: Rothschild & Co, Bloomberg
Source: Rothschild & Co, Bloomberg

So my view regarding cash deposit rates? … all that glitters is not gold.  The long term outlook for cash is not good, don’t be blinded or dazzled by a short term potential gain, because the numbers don’t stack up over the longer term!

 

 

Summary

 

Our aim is to ensure that you are able to enjoy life while we take care of your finances, ensuring you’re set up in the most tax efficient way for your particular circumstances.  If you are considering how best to set up your finances as a resident of Spain please contact us.

 

Speed Financial Solutions are a highly qualified and regulated financial services provider looking after clients throughout Spain and the UK.  Established in 2010, we provide a discreet and comprehensive service to individuals, and our service is tailored to suit your needs taking advantage of tactical opportunities as they arise in respect of your financial planning.

 

Our Principal, Andrea Speed, is a qualified Discretionary Investment Manager specialising in Investment and Risk, Taxation and Trusts,  and a qualified Pension Specialist.  Andrea is also a Fellow of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world. 

 

Fellowship is the highest qualification awarded by the CII (Level 7) and is universally regarded as the premier qualification.  It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.  Along with a Fellowship, Andrea is a CII Chartered Financial Planner.

 

Please take a look at our website – www.speedfinancialsolutions.com

For further information contact us on Tel 951 315 271 or 951 318 529

 

We are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation.  Follow us on Facebook for regular updates.

 

This communication is for information purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

 

 

Andrea J Speed FPFS (DM), M.A.

Principal, Fellow and Chartered Financial Planner

Speed Financial Solutions

27 February 2025

 
 
 

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Postal address:

Speed Financial Solutions

Suite B062 La Trocha

Centro La Trocha 3C

Coin, 29100

Malaga

Spain

Opening hours:

Mon-Thu 9.30am-4pm

Fridays we work remotely but are always available on the phone

Summer hours 9.30-3pm

(July-September)

Physical address:

Speed Financial Solutions

Avenida Maria Zambrano

Coin

29100

Malaga

Spain

The financial advisers trading under Speed Financial Solutions are members of Nexus Global. Nexus Global is a division of Blacktower Financial Management (International) Limited (BFMI). All approved members of Nexus Global are appointed Representatives of BFMI. BFMI is licensed and regulated by the Gibraltar Financial Services Commission (FSC) and bound by the rules under licence number 3647: http://www.fsc.gi/regulated-entity/blacktower-financial-management-international-limited-3647

Both Andrea Speed (ICCS Licence No. 7191) and Kathryn Dillon (ICCS Licence No. 7190) are trading as Speed Financial Solutions and are  Appointed Sub-Agents of Blacktower Insurance Agents & Advisors Ltd (BIAAL) which is licenced and regulated by the Insurance Companies Control Service (ICCS) - Licence No. 5101.

Speed Financial Solutions, est. 2010

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