Why “safety in numbers” might not apply to investing Investments 18/06/2024 Being part of a group can make you feel like you’re less likely to fall victim to a mishap or other negative event. While the hypothesis might be true in some circumstances, the opposite may be said when you’re investing. Read on to find out why failing to follow the crowd could be a good thing. The inclination to be part of a large group and adopt the behaviours of people around you is sometimes referred to as “herd mentality”. Following the same route as other people can give you a sense of security and help you feel as though you’re making the right decisions. After all, you might think: they can’t all be wrong, can they? Yet, financial decisions should often be based on your circumstances. So, a safety-in-numbers approach could have the opposite effect and harm your long-term finances. A fear of missing out could lead to you following the crowd There are lots of ways that a herd mentality might affect your investment decisions, including a fear of missing out.
Uncertainty drives record numbers to take out income protection. Here’s what you need to know Protection 18/06/2024 Figures from the Association of British Insurers (ABI) suggest a record number of families are taking out income protection to create a safety net. Read on to find out how income protection works and whether it could be valuable for you. Income protection would pay out a regular income if you were unable to work due to an accident or illness. As a result, it could provide you with a way to keep up with your financial commitments if your income unexpectedly stops. Income protection will normally continue to pay an income until you’re able to return to work, retire, or the term ends. Usually, the sum provided through income protection is a proportion of your regular salary, such as 60%. You’ll need to pay a monthly premium to maintain the cover, the cost of which will depend on a range of factors, such as your age and lifestyle.
Investment market update: April 2024 Investments 21/05/2024 Interest rates and inflation continued to affect markets around the world in April 2024. Read on to find out what else may have affected investment markets and your portfolio in April. Expectations of interest rate cuts were good news for gold. Investors who feared falling interest rates would lead to lower returns on cash and government bonds purchased more gold. It led to the asset hitting a record high on 8 April at $2,535 (£3,171) an ounce. Yet, while many experts are predicting that interest rates will fall, Kristalina Georgieva, the managing director of the International Monetary Fund, warned that central banks must resist pressure to cut them too soon. UK The UK ended 2023 in a technical recession – defined as two consecutive quarters of economic contraction. The latest figures suggest the UK is already out of the recession.
How to beat the potential harmful effects of “loss aversion” on your wealth Investments 21/05/2024 “Loss aversion” is a type of bias that could affect how you manage your finances. It’s a concept that was developed by renowned psychologist Daniel Kahneman, who won a Nobel Prize for his influential work and sadly passed away in March 2024. To celebrate his life, read on to find out more about loss aversion and how it could impact you. One of Kahneman’s main arguments is that people’s behaviours are rooted in decision-making. He noted that bias and heuristics – the mental shortcuts you make to solve problems – are important for making judgements quickly. However, the downside to quick decision-making is that errors can occur. One of the biases he defined was loss aversion. Losses are more “painful” than gains In 1979, Kahneman and his associate Amos Tversky coined the term “loss aversion” in a paper. They claimed: “The response to losses is stronger than the response to corresponding gains.” In a study, Kahneman and Tversky asked participants if they’d rather have a: A.
The announcement of the new UK ISA marks 25 years of tax-efficient savings Investments 10/04/2024 Since they were introduced in 1999, ISAs have become a finance staple for many households thanks to providing a tax-efficient way to save and invest. As ISAs turn 25, chancellor Jeremy Hunt unveiled plans to launch a new UK ISA and has previously announced changes that could provide you with more flexibility. Read on to find out what you need to know about ISAs. The UK ISA could increase your allowance by £5,000 The government will carry out a consultation about the introduction of the UK ISA until June 2024. So, there are currently only a few details available. In the March 2024 Budget, the chancellor said the UK ISA would have a new £5,000 annual allowance, in addition to the existing ISA allowance, which is £20,000 in 2024/25. It will be a type of Stocks and Shares ISA that’s designed to encourage investment in UK companies.
