Is it time to stop investing?
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- Опубліковано 26 лип 2023
- With a higher Bank of England base rate, is that tempting you away from investments into cash? Or maybe the mortgage nightmare that is looming is making you consider paying off a chunk of your mortgage instead? Let's delve into my thoughts on this.
Links mentioned:
Halifax Mortgage Calculator:
www.halifax-intermediaries.co...
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Hi there! My name is Tom Morgan, Founder & Financial Planner of Orca Wealth Ltd, welcome to my UA-cam channel ‘That Finance Show’. I’m very glad to have you here because this channel gives me the opportunity to help people and share information with those who wouldn’t normally get it.
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#interestrates #investorcash #mortgage
I began investing at the age of 33, primarily utilizing my hard work and dedication. Now at the age of 38, I am delighted to share that my passive income exceeded $100k for the first time in a single month. This advice is truly valuable, so don't hesitate to take action. Remember, it's not about achieving wealth quickly, but rather about building wealth consistently and persistently.
This is superb! information, as a noob it gets quite difficult to handle all of this and staying informed is a major cause, how do you go about this are you a pro investor ?
I understand the uncertainty of tomorrow, and I agree that starting to invest today can be challenging, especially without a clear understanding of where and how to invest. Since I've personally tried navigated the path to passive income, I'd be delighted if you can offer me some guidance based on your experiences that help you embarking on your own journey towards financial security.
I never expected it, but after closely monitoring my portfolio's performance, I was astounded to see it generate a staggering $473k in just the past two quarters. This eye-opening experience has given me insight into why experienced traders can achieve remarkable returns even in lesser-known markets. Taking this leap was undoubtedly the boldest decision I have made recently.
That's impressive! I could really use the expertise of the advisor, my portfolio has been stagnant.... Who’s the person guiding you?
The Adviser I'm in touch with is *'Nolan Velden Brent'* , he works with Merrill, Pierce, Smith incorporated and interviewed on CNBC Television. You can use something else. for me his strategy works hence my result. He provides entry and exit point for the securities I focus on.
I decided to do all 3 a couple of years ago. I overpay my monthly mortgage amount by about 15%, invest 15% of my gross salary into my pension, save 5% of my gross salary into savings. On top of this, I invest small amounts regularly into my son’s ISA’s and pension. It’s not a get rich quick plan but hopefully a plan that will provide a solid base for when I retire and for when my son starts his career.
Sounds like you are doing great. Well done.
You must be earning over £5000 a month net .. can I do that if I am earning £1600 a month when my outgoings are £2700 and I am always short on money
Mortgage recently paid off at 38, not throwing cash at the market, more gently drip feeding in monthly, with the intention of a few ‘lump sum injections’ each year when and where possible 👍
Mortgage free at 38 - huge congrats to you
@@ThatFinanceShowThanks, lots of ‘unnecessary saving’ over the years 😂 but definitely my number one objective and with the current interest/inflation thing going on, I’m pleased with my decision. Great channel by the way, always makes me laugh 😂
@@ItsMe-co4bj ace thanks !
Wow. Mortage free at 38!
In London? SE?
I think that’s the life, well done
Well observed that the ZIRP period was the aberration. IF strip out the last 15 years and the period of high inflation 1965-85, the "normal" range for Bank (Base) Rate is 3 - 5 pc.
100%
Great video, Tom. Definitely food for thought. I'm 61 and happily my mortgage was paid off 5 years ago and I have zero debt, and I remain fully invested in my SIPP. I did sell half of my VLS80 a few months ago (24% of PF). Half the proceeds went into CSH2 and the other half into FTSE Dev World ex-UK. Quarterly dividends from FIW, VWRL and VUSA pay the platform fees and the rest goes into a rotating choice of OEICs.
Sounds like you've got a plan Keith - solid base always makes it easier - no debt!
Fantastic video. Thank you!
Glad you liked it!
What do you advise your clients to invest in as they reach retirement?
Nicely done mate. Personally I have 3.5 years left at 2.19% on mortgage.
So I’m maxing investment ISA, and maxing First Direct savings account, this matures in October at which point I’ll use that cash to overpay mortgage, I’ll do the same thing for the next 3 years, all other things being equal.
Man with a plan
I’ve already remortgaged at 5.25% up £300 a month. Biggest investment was upgrading my employer. Fortunate salary is enough to cover the increase and continue to allow me fill my ISA and contribute a significant amount to my pension.
No idea how people on median to low incomes can cope with it.
Well done mate, you’ve weathered the storm there. Good luck
I took on a weekend night security job in addition to my 9-5 type job.
Will be sending in my additional £300 a month to the big bank from next April......
Sold my 5 bed last Sept at the height of the house market went renting for 6 months, just bought a 4 bed house, paid off my mortgage and put a big chunk of cash in an ISA, feeling very happy right now, just looking at what to do with that next year when the ISA comes out of it's 12 months fix.
We are going to clear the mortgage in August 2024 when our 5 year fixed deal expires (1.9%). Added the last bit of money to the savings account this month - maybe I’m too conservative leaving it in a 4.3% savings account until then, but it feels good to know the money is there and ready. Still feeding the S&S ISA and pension via SS and look forward to increasing the savings into these once the mortgage is in the rear view mirror - it’s more of a psychological thing for us.
We're on a very similar plan. Mortgage rate is 1.8% until 2027, so we're saving everything we can to clear it then. Mathematically we may be better investing more and keeping the mortgage, but being mortgage free at a relatively young age is much more important to us.
Something you could consider, and that I'm doing currently, is to take out an "offset mortgage". This allows you to keep cash in linked accounts to your mortgage, so if it's a 300K mortgage and you have 50K in cash, you "only" pay interest on the 250K. True, you also don't get any savings income, but that also means no tax. In the meantime, you have cash that you can still get access to instantly if needed, including if an investment opportunity comes up, or just for emergency.
I've currently got 13.5K in mine and adding several thousand to it monthly. I will revisit that toward the end of the tax year, and potentially move some of this into my ISA(s), but I might not.
Yeah used to have one, loved it. They are few and far between nowadays. Thanks for the comment
I'm still mad that I had no idea you could get a longer-term fixed rate mortgage than 5 years. With rates as low as they were when I bought my first house I absolutely would have gone for a longer term to protect myself.
Otherwise, my strategy is essentially keep throwing cash into my ISA. I'm ~3.5 years away from mortgage renewal but I hadn't considered potentially liquidating some stocks to lessen the "pain" after renewal - assuming rates stay the same as now, or higher.
Great video! Despairing would-be first-time buyer here. Moved out of renting in London because of eye-watering rent which meant we couldn’t get our deposit together. Now elsewhere paying less than half our London rent and our deposit is pretty much there but…mortgage rates are sky high and house prices still seem pretty inflated to boot. Wondering if locking into a house right now is more a liability than an asset because the mortgage repayments would give us less cash to use to start regularly investing. Was looking forward to finally having our own place (especially as we’d like to start a family in the coming couple of years), but would you say best to hold off and be patient if we can rent relatively cheaply and use any excess to invest for the long term instead until rates (possibly…very gradually) come down in a couple years?
It's difficult isn't it, I always try and not let external factors change life decisions - it would be a shame to put off having a family for example because of mortgage rates! I think if you buy within your means I would still look to do it. Just don't overstretch and then if rates do come down in the future you'll benefit then. Don't put your life on hold.
Great video. I would like to ask though why you have your money in an actively managed ISA, presumably with higher fees, rather than a passive unmanaged index tracker like the FTSE Global All Cap Index Fund Accumulation? The latter apparently outperforms the former in the long run.
It's not, it's a passive portfolio. I do use some active investing elsewhere but the Lifestrategy portfolios are passive (and cheap!)
Hey, great video thanks. One thing I don't hear many people mention about mortgages, is the daily interest that is being added and compounding. If you have a large balance, the daily interest would surely be high? Should that be factored into the overpay mortgage vs savings vs investing argument? Thanks 😊
Interest has to be given in APR, which is the annual equivalent interest rate. Therefore 6% APR on a mortgage and 6% APR on savings are exactly the same. The daily interest compounding is irrelevant.
Ahh thank you! 😊
Great information, but could you have someone check your comments for scam information being thumbed up to the top of your comments.
Thanks, yes I try my best but for every one I squash, another 5 appear. I’ve just gone through again. Thanks for noticing
Thanks for the video, very thought provoking. I would love to hear your opinion on the following scenario.
If you've already maxed out your S&S ISA but still have quite a bit of cash in savings accounts, say more than you need for an emergency fund, and still on a low interest fixed mortgage, is it better to invest that spare cash in a general cash investment account or put it in a fixed savings bank account? Thanks again for the great content.
Hey thanks for the question. It's a good one. If it's for the long term investing is a good option - for all the reasons I talked about in this video. However, while on a lower interest rate overpayments on a mortgage have a bigger effect as you attack more capital, don't rule this out. I don't suggest anyone holds more than they need to in cash outside of emergency fund money.
@@ThatFinanceShow Thank you, the overpayments option does make a lot of sense. I 'll factor this in to my decision making.
I have been overpaying - just check mortgage terms in case they are tight about it
Thanks Tom but I'm the wrong side of sixty.
I don't really want to be 'hopping' from one place to another with my finances.
I'm hanging on to my
stock investments.
As Sir Winston Churchill said
"Ride out the Storm."👍
Greedy when others are fearful….top man.
Any advice about premium bonds? :)
Great video 😊 it is easy to give up on investing when you are offered 5% guarenteed returns on cash now, but I'll keep contributing to my index funds in my stocks & shares ISA. I won't need it for at least 30 years so I'll just close my eyes and put my fingers in my ears if the market underperforms cash in the coming year 😂
On the other hand, all my Lifetime ISA holdings are now in the Royal London Short Term Money Market Fund, as i am looking to buy a house in a year or so. Nice to see my potential deposit getting a bit bigger by a couple of quid each day.
Fingers in ears, tape your eyes shut. Ahhhh ignorance is bliss! This has proven to be a good strategy!
All good advice except for investing into Life Strategy funds which are far to UK weighted. VWRL is much more USA weighted. Do you do this because you think UK stocks are undervalued compared to USA at the moment?
Yes it’s a criticism they gets thrown at the Lifestrategy funds often, and I do get it. I’ve even criticised them for it myself on here before. Still around 35% in US stocks though. Easy to skew the portfolio to US more if you want, just stick a a US fund in there too and allocate to suit
Great video and insights as usual! Here are my 2 cents about the topic:
A) Western central banks have a self-imposed inflation target of 2%. Due to deflationary forces like cheap labour (globalisation) and cheap gas (Russia), central banks somehow managed to keep inflation close to this target even with massive stimulus programs and near-zero interest rates for the past 15-ish years.
B) Interest rates are rising to battle inflation by slowing down the economy. Since they are struggling to achieve this target, they might settle to a 3% inflation rate in the near future. Some assume that the 'new normal' will be around this figure due the production onshoring and tensions with Russia and China.
C) Every major recession in the past 20 years has been triggered by a sudden increase in interest rates (especially the FED). The 2000 dotcom bubble, 2008 mortgage crisis, etc. and this time is no different.
D) Once a hard landing is evident to everyone and people start losing jobs, there will be no point keeping the interest rates at 5+%, because the inflation will probably be below 2% due to demand destruction. Also, the repayments of interests will be so unaffordable for governments that will have to finance debt with more debt, which is a trap a few countries are already in.
To conclude, 6% mortgage rates will not stay here for the long term. They are just here to squeeze disposable income and trigger demand destruction. One this goal is achieved, I believe it'll be likely to see central banks to bring down rates to 0% to stimulate the economy and start a new economic cycle.
As soon as you mentioned all western I ignored everything you wrote after . 🙄
The days of base rates below 4% are over.
Global tracker at a record high - I am happy with my current investing.
Glad to hear it
My fixed term is up in around 2 years. Investing as much as possible between now and then and simply hoping for the best interest wise
Similar to me mate
Good video. I am pretty much forced to still be fully invested as the tax free interest allowance is too low. The only change I've made over the last few months is buying more premium bonds.
I got my first mortgage last November, fixed for 5 years at 3.5%..
That 3.5% rate looks good now doesnt it if you look what's on offer
@@ThatFinanceShow yeah, at the time I felt I could have gotten a better rate but now it's a no brainer. Peace of mind for years now.
@@Rowan126 peace of mind is hard to put a price on. Worth a fortune
@@Rowan126the main thing to do is have a financial plan. Don’t just sail along for 4 and a half years and panic when the mortgage comes up for renewal. Look in to how much equity you will have at the end of 5 years with some variance on the likely house value.
I overpaid my mortgage rapidly when I have 10 years to go. I chose to reduce the payment and keep the term the same and then used the reduced payment to compound in to the next overpayment. Should work out the same in terms of mortgage cost I think, but has the added advantage of if you can’t over pay anymore you realise the cost reduction now. I wanted to be rid of my mortgage because keeping my job was questionable and I didn’t want to loose the house. Went without a lot for several years but got the mortgage mostly paid off within about 3 years. Now mortgage free and am plotting my spare cash into my ISA and maxing out my pension. Hoping my job will keep going and keep me on the investment road.
Excel has a formula for working out loan repayments called pmt(). Use it and build some models for your financial plan. I wish I had years back as I’d be even better off than I am now.
It's time to pay off your debts off first. Starting with the most expensive. Once that is done then start thinking about investing
It’s always been the case to clear expensive debts before investing but mortgages used to be so cheap you could arguably do better investing than the rate you are paying. It’s this relationship that has potentially shifted, although long term stock market performance would still suggest better than mortgage rates…
@@ThatFinanceShow overpaying on a mortgage does pay down the capital and only saves on the interest in the long term. You will reduce the debt and reduce the term and any future interest will no longer be accrued.
Better to pay off CC's and unsecured loans and expensive vehicle credit first. Get rid of the liabilities and retain the assets
@@HDB1974 Housing is likely only as asset instead of a commodity because there is zoning and minimum requirements to build...... As long as there are more houses than there is need for it would be more like any other commodity.
Evening, Enjoyed the video, very informative. Im in the fortunate position to have around £300k lump sum to invest. Im mid 50s and self employed who's paid into a personal pension since my early 20s and a small mortgage, what should I do with my windfall?
Quite a few moving parts here and things to consider, you could clear the mortgage but if the interest rate isn't too bad and the payments manageable (you mentioned it was small) that might be less appealing. It's all about the time horizon, if you can go long term then you need to look at what assets perform best over the long term.
@@ThatFinanceShow thanks for your response, much appreciated.
Now that I am a ripe old 64, I believe one of the best returns is to top up my state pension
Get a forecast and do the maths but yes, often makes sense to top up
At 64 you should easily have been at max state pension contribution surely?
where have you been all my life? could you look into REITs / buy to let investing next?
I've always been here! Where have you been!! Ha. Welcome!
Its getting tighter don't geg me wrong but I have roughly £600 disposable per month and I put 20% into an emergency fund, 20 into stocks and 60 towards svaing for a house. Should orobably review this but I'm trying to set thr girls up for the futire and have a dceent retirement fund.
I'm debt free and started late to invest.
Debt free is a great base
being close to 60 I'm holding some cash in the form of short term bonds ( 1 year staggered to provide an income ) but still 50% invested,
I only started investing AFTER the massive rise in stocks during the money printing party that was covid aftermass so lost a lot and only just coming back to what I put in, so in 3 years or so I've only lost massively to inflation and it's been a shockingly bad experience but I'm pretty confident in staying invested and increasing my investment % over the next few years to around 70 or 80%,
I plan to take the interest and invest it and maybe invest each lump of cash as it ends the years fixed rate.
The next 5 years will be interesting ......
Trust the long term process. You’ve been brave sticking through that volatility in the early years, you’ll do fine
Savings rates are still lower than inflation though, so hold cash and you're still losing.
Yep, this is very true. In fact they are further away from inflation now than they were back when rates were nearly zero but inflation was 2%
Ive cleared the mortgage, im 42 and am working on 3 retirment pots. Im investing in crypto to fund an early retirement. If i lose everything here i'll just reture at 58/60. I am paying into a pension which will fund i hope around 12-15 years of retirement. And i maximise my stocks and shares isa which i hope will last me between my pension running out and death. If not ive got some assets i can sell and a house i can downsize.
I would say i save/invest an absurd proportion of my income but i leave myself enough for a holiday and a few g&ts every week.
It's all about balance isn't it, enjoying the 'now' but planning for the future too.
For me, paying off the mortgage was a no brainier even before the rate rises became apparent, as whilst I earn a good salary, it’s in a volatile profession prone to endless restructuring and associated layoffs, with this out the way, my safety fund could then actually be reduced since my mandatory monthly outgoings went from £1800 to £600! Investing is now the next big hurdle, but I’m optimistic about it since I have minimal debt, and willing to be more adventurous.
Good luck on the investing, keep me posted.
Should you overpay a rental property? Since the tenant is paying the mortgage anyway.
Hey, replied on your other one! Thanks for watching
What will your real value be after 10 years
I am conscious that if you have £100 and the market drops 50%, to get back to £100, you need a 100% increase to get back to £100
So I am always confused when someone says I’m up 20% on my shares, is that 20% after all the up and downs and that £100 is now £120?
No one have done the detailed mathematics of investing.
Can you?
One thing REALLY worries me and it's this,
Baby boomers will be retiring en masse in the next 10 years , we are huge in numbers and have contributed into the system through work and pension investments and will have driven the markets up all that time,
As we retire we will do the opposite and be a drain on the system and on investments driving the markets DOWN unless there are enough youngers able and willing to keep pumping into the market,
It's kind of difficult to see how they will be able to do it given the state of things..
Fair point, except the markets and the economy are not the same thing.
Yes demographics are definitely shifting and I don’t think we’ve seen full effects yet.
Morning Sir I have got a stupid question... if the inflation in the UK is about 7-8/ish% and let`s say I will invest in the S&P500 and I will gain the same/ish 7-8% per year and because of the inflation and the gain on the S&P500 is the same I will not make any money in the future? Sorry I asked something very stupid LOOL
Thank you very much for your help....
My mortgage is fixed until 2027 so for now I'm still putting a little in stocks and a little into savings which I may dump into my mortgage as a one off when it's due for renewal. I'd probably invest more if I could but I'm one of those who can't stand confrontation or competing so I'm sat on min wage.
You've got plenty of time before you need to make a decision then, could all look very different come 2027 so no point sweating it now. Doesn't have to be confrontational to get paid what your worth, you owe it to yourself to paid fairly for you time!
Glad I haven't had a mortgage since l was 40.
It's certainly nervy times for those who mortgaged up to the eyeballs.
Good video. Almost all of my money is in cash (actually the Vanguard Sterling Money Market) at the moment, because I'd be nervous at investing in the US stock market when it's almost at an all-time high. I will invest at some point, but I hit state retirement age in seven years... so I don't have 20 or 30 years to recover if the market were to crash (or is there is a worldwide recession, for example).
A good example of why timescale matters. Only thing I would say is you might retiring in 7 years or so, but you are going to be 'invested' for a lot longer as you drawdown throughout retirement. Your time horizon is probably longer than you think.
@@ThatFinanceShow true, retirement isn’t a cliff edge. Still makes me nervous, though.
We've been overpaying our mortgage the maximum 10% each year and have decided to let our fixed rate (3.3%) run out at the end of this month, increasing to 8.49%, and overpay the mortgage (c.70k) with all our available income for about 18 months to pay it off (16 years early). I'll still be investing a tiny amount each month (about £50) because I like the feeling of investing each and every month, rain or shine. I won't be withdrawing any investments because I think that's a slippery slope and I don't trust myself!
Can you find a deal with no early repayment penalties instead and still throw money at it?
@@ThatFinanceShow It's a good idea, and I've looked but from what I can find I'd need a tracker with an intro rate, and these would come with >£1000 setup fees, so there'd be perhaps a couple hundred quid in it if we switched.
I thought i buy one of these 100k EV’s to save the planet do you think i should use the money instead to pay off my mortgage?
You could always live in your car?
Stop investing. And pay off your mortgage. Simple
I wanna meet this cousin of yours!
Hahahahahah 😂 no comment.
🤣 genius comedy intro
Threw everything at the mortgage when the covid shit show first started and finished ten years early. Guessed that printing money to infinity would cause inflation followed by interest rate rises. No regrets.
I’ve never met anyone that regretted paying off their mortgage early
Sorry to butt in but I did the same, I could see unbelievably low interest rates couldn’t go any lower, so I smashed my mortgage down to zero. No new car, no much wanted motorbike, but zero debt. I’m so happy. Now I can put £1000 a month anywhere I like.
@@steviejd5803 Not butting in at all. Really happy for you. Love to hear of other people’s successes. Huge congrats xx
Paid my mortgage off a month ago . Still had 9 yrs 6 months left on it. I save 20% into a workplace pension . Might not be flush with cash at the moment but I will be ok in the future.
Pension mean you get people working to fund you. If you had no pension the equation might be different.
How does it feel to be mortgage free?
Wonderful! Paid off mine in May 23
If it's a choice between investing or paying down a mortgage then pay down the mortgage..... The latter gives you a piece of your own land, and God isn't creating any new land last time I looked.
Investing is fine after you own your home outright.... but buying bits of paper that can lose all their value overnight instead of paying into owning tangible property makes no sense to me.
I think it depends how you invest, chucking money after a few speculative individual stocks is very different to a properly diversified and well managed portfolio.