September 2008
After what has been probably the most turbulent economic period that certainly I can remember, the world is pretty much reeling from one shocking revelation – just because you put your money in a bank, it isn’t necessarily safe. This is kind of like telling a child there is no Santa Claus, or telling teenage girls they might not actually end up meeting Mr Right someday.
“Banks are inherently safe places for our hard earned funds” – Discuss. Well this is one of the most basic fundaments of what we have grown up assuming. We correctly by now have worked out that putting your savings in a shoe box under the bed isn’t very smart – you might get burgled for starters, plus as time passes money becomes less and less valuable so it is definitely not a future proof strategy (I remember my parents buying a house in Ealing, London for £44k so clearly this theory plays out). So instead we have learned that we should put our money in a bank and it will be safe, and we will have access to it anytime should we need it.
Now such ideas have been shattered its time to look at other investment options – such as stocks and shares. Anyone who owned shares in Lehman Bros would probably have said (up until this week) that those who prefer to not play a game of risk with the family gold should sensibly place their funds with only the oldest, most established global financial institutions - those with a strong track record and an unshakeable base of assets that could insulate its customers and shareholders in the toughest, roughest of times. Hmmmm.
So we have ruled out the shoe box and the bank, we are not especially comfortable with stocks and shares as that should really be left to the clever people in suits who devour pink coloured newspapers in the mornings – what else then? Well, there are always pension schemes. Its definitely a good idea to squirrel money away for later so we are virtually encouraged to start contributing to pension schemes just as soon as we have finished collecting our A-level results. Oops again. Most pension schemes are linked to the stock market, which after the tumbling of the markets this month, means for many that its more likely to be Mevagissey than Monaco for the Autumn of their years (not that there’s anything wrong with retiring to Cornwall except the bar staff don’t seem to have the Kir Royal very well mastered which is odd considering it only has two vital ingredients).
Indeed the ‘safe’ and ‘bullet proof’ institutions within which we were told will make our money “work harder for us” seem to have let us down badly this year. Their supposed stability has been exposed as fragility. Northern Rock, Bear Sterns, JP Morgan, Citi Bank, Fanny M and Co., Lehman Bros., AIG, Halifax… I could go on. Of course these companies still represent a lower risk than other, sillier things which I haven’t bothered to mention such as shoving everything on red, or having a good feeling about Lucky Lady in the 3’o clock at Kempton Park , or buying into a Bulgarian ski resort, but only marginally it seems!
Frustratingly and ineffectually, we don’t seem to have anyone to blame for this meltdown and although Governments are doing their bit (albeit with our money) to keep these mighty and ancient ships from sinking (by bailing them out with the financial equivalent of a collander), it does beg the question that if this could be allowed to happen in a time of supposed steady growth and general economic buoyancy, what’s to say it won’t happen again.
If you’ve been for a glass of plonk with me lately you’ll know that I have my own theories about all this missing money, and I don’t think its all down to these sub prime loans. I mean, just how many trailer parks can there be in America to swallow up literally trillions and trillions of dollars and for nobody to notice – talk about taking your eye off the ball?? But that’s another story… The point I am making (and lets be honest you probably knew where this was heading) is that for those of us who want to be in control of our money, and therefore our destiny, the answer to the “what should I do with my money now I can’t trust the big guns?” quandary is a simple one – property.
Admittedly, whilst things are in freefall like this, we can’t expect property values not to fall, but actually this isn’t the rule in all markets and its certainly not a given. More to the point, if your property portfolio dips in value, the only real concern should be making sure you aren’t so highly geared that you can’t afford to maintain the portfolio if interest rates rise and rentals drop. If you have a reasonable amount of equity you should be fairly well protected from being forced to sell in a falling market, and besides, that’s a planning issue so we won’t dwell on it.
The key issue here is that if your property portfolio disastrously plummets in value, and I I am talking serious nose-diving stuff here, the only thing you need to do is wait. That’s really it. You simply w-a-i-t. What could be easier?
If you own shares in an institution that has just gone pop you can of course never recover your funds. If you had money in a bank that has collapsed (and there seems to be no science to which banks Governments are helping and which ones they are letting fall – its rather a lottery to the untrained eye) then your money would be insured up to a certain value. In the UK I believe its about £34k – which is great if you had savings of, well, erm, £34k, but not so fabulous if you had a quarter of a million pounds tucked away, whereas a property portfolio that has bottomed out will simply recover itself over time. All by itself. Without you having to do a thing.
With the correct levels of research to hone in on seriously promising markets as well as more proven ones (a good portfolio will of course provide both growth and stability), with exhaustive due diligence conducted on opportunities, and with a long term, low risk strategy for building a diverse bunch of assets across multiple locations and markets, a property portfolio in my humble opinion has to be the preferred investment strategy to ensure your freedom years are spent properly. And by properly I mean propped up at the Hotel de Paris at sunset, delicately sipping a perfectly poured Kir Royal and watching the beautiful people go by...
With kindest regards,
Claire B
Ps. If you’d like to talk through some of the most interesting investments that SE Asia has to offer please do get in touch. Likewise, if you have money in a pension plan that isn’t setting the world on fire please also get in touch as there are ways and means of converting these savings into property based investment schemes.
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