British Parliament In Revolt Over Pasty Tax!

Cornish Pasty

OK so this is just for a little fun, every now and again something symbolic happens which seems to have a much wider effect than it should.  I’m not saying the pasty tax is ever going to lead to the scenes following the Boston Tea Party (1773) or recreate the War of Jenkins Ear (1739), but in a week when the Prime Minister is quoted at an event about the Olympic Games as saying “I'm a pasty eater myself” before defending the tax it’s got all the making of a true national farce.

What is the Pasty Tax?

The so called pasty tax relates to the level of VAT (Sales Tax) levied on goods and services.  Traditionally, the decision whether to apply VAT or not relates the question of whether or not an item of food is sold hot or cold.  Foods served hot are considered a luxury item and have VAT levied on them, foods served cold are considered as basic and so don’t attract the levy.  In short, you’ll pay VAT on your fish and chips but not on a sandwich.

The so called pasty tax is effectively a reform of the tax system aimed at closing a loophole on the sale of hot baked goods available at bakeries and in the supermarkets.  Under the reforms, the tax would now be levied on baked goods which were served hot in such outlets but not those served cold.  So if going to buy a pie, pasty or other baked items from Greggs, buy it hot and it will cost 20% more than the same item sold cold!

The Pasty Tax, What’s The Fuss?

The government and David Cameron have argued that the reforms simply reflect a fairer application of the system which has traditionally governed whether of not the tax is levied on an item.  However, the press and those with a vested interest in not paying the tax have accused the government of being out of touch and introducing a tax on the poor.

Key opponents of the tax include Ken McMeikan CEO of the bakery chain Greggs who saw millions wiped of its shares following the decision.  Other opponents include those representing the Cornish pasty industry, now set to see a rise in costs associated with the tax.  However, some have capitalised upon the media’s coverage of the event with Gavin Williams of the West Cornwall Pasty Company quoted as reacting to Cameron’s comments with “We thank him for his glowing endorsement of our quality product and for helping to spread the news that a West Cornwall Pasty Company pasty is the best around.”

The Benefits of Index Funds Vs Actively Managed Funds

City of London at Night

While there are many choices open to those looking to invest in funds, one of the key decisions relates whether to invest in an index linked fund or an actively managed fund.  While there is no clear answer as to which represents the best investment, it is worth taking a look at the pros and cons of each before handing over your money.

The Costs and Benefits of Index Funds

Index funds are funds which seek to give an investor an exposure to a common basket of investments referred to as an index.  Such funds may seek to mimic the performance for example of the FTSE 100 or a specific sector such as mining stocks.  The key to understanding an index fund is to consider that you should see almost like for like performance between your fund and the performance of the relevant index.

The advantage of index funds on the whole relates to costs, for example L&G’s FTSE 100 index fund has an annual management fee of 0.65%, compare this to the company’s UK Alpha fund which has an annual management fee of 1.5% and that’s after paying a 5% initial investment charge.  In short, index linked funds are usually much cheaper than actively managed funds.  However, such funds will only ever (or should) reflect the average performance of the market.

The Costs and Benefits of Actively Managed Funds

Actively managed funds by contrast seek to give levels of performance which beat the market and so in essence, one would expect to see actively managed funds giving higher levels of performance.  In an actively managed fund, a fund manager and their research team will actively trade the assets of a fund in accordance with the objectives of the investment in order to gain the best returns.  Funds may have a wide range of themes from emerging market bonds to natural resources funds and beyond.

While such funds may offer higher levels of performance than index funds (although not in all cases), the associated costs can be quite high thus eating into returns.  Here management fees may be several times those of an index fund and there may also be a high initial charge for entering the fund.  In addition, research would seem to suggest that few fund managers are able to consistently outperform the market year in year out.

So if considering whether to opt for an index based investment or an actively managed fund there are many issues to consider.  Key considerations should include the annual management charge and any additional fees such as initial investment charges.  In addition, consider carefully the level of performance seen by the fund over the long term, not just the previous year’s statistics.

The Difference Between Ethical and Green Funds

The Shard, London UK

While any limitation on the kinds of equities or funds to be invested in may see sub-optimal levels of performance, some will wish to restrict were they put their money based upon ethical beliefs or a desire to contribute towards positive forms of investment.  For those who have such objectives, both green funds and ethical funds may offer an ideal way to combine investment with morality.  However the key question is what is the difference between the two options?

What Are Ethical Funds?

Ethical funds may be seen as those funds which operate according to an ethical code of conduct as specified by the fund managers.  Typical ethical codes of conduct may see funds not placing money in companies which invest in tobacco, arms production or other ethical issues such as high environmental impact industries.  While the code of conduct will be specific to each fund, overall the approach may be seen as one based upon a policy of exclusion of “unethical” investments rather than one seeking to support a given cause or provide exposure to investment in a specific sustainable industry.

What Are Green Funds?

Green funds on the other hand seek to invest specifically in enterprises which as seen as having a positive environmental effect.  While the composition of such funds may vary, typical investments will include equities and bonds associated with companies involved in renewable energy, green transport and waste management.  For some, an investment in green funds may be seen as a way of investing in a way which leads to a positive social development.  For others, green funds may simply be a way of gaining an exposure to industries which are often seen as representing a rapid growth sector.

While there is no clear cut lines between what constitutes an ethical fund and a green fund, generally one may consider that ethical funds will on the whole embrace a wide range of investments so long as the companies involved do not breach the code of conduct of the fund.  On the other hand, green funds may generally be seen as funds which specifically seek to invest in companies which make a positive contribution to a wider range of stakeholders than the investor alone.

As such, before selecting a green or ethical fund it is important to consider carefully your own specific investment objectives and match these to a fund with relevant code of conduct and investment processes and practises.

How to Make Money Listening to Music Online Using Slice the Pie

Vinyl Records

OK so this is not a get rich quick scheme, in fact it’s not a get rich at all scheme, but if you enjoy listening to music and want to earn enough money to buy a few extra cappuccinos this is well worth checking out.

Make Money Online: How Slice the Pie Works

The site is hosted as slicethepie.com and allows users to listen to music from a range of new and generally up and coming (or not) bands.  After listening to a track, rate it one to ten and type a short review of the song.  The site will then pay you for each review a small fee of a couple of cents per review.  The payout depends upon the number of key words you use, length of the review and the level of experience on the site.  As such, the more reviews you do, the greater payout you should be able to make on each tracked reviewed.

The reviews are undertaken on an anonymous basis but are used for a wide variety of uses including being sent to radio stations as recommendations and the bands whose music is being hoisted on the site.  Don’t worry, if you don’t like a track be honest, no one will ever know it was you who gave a song a nasty rating!

How Much Can I Make Listening to Music Online?

Once you have spent some time on the site and reviewed a number of tracks, you can download your payment via PayPal as soon as your balance reaches $10.  While you can’t expect to make a career out of this site, it’s a nice way to put some bonus money in the bank and listen to some great (and terrible) music from previously unheard of bands.

So if you enjoy your music and are looking for a fun way to make some extra money online, check out this link to Slice The Pie.

Why it May be Best to Invest Through a Fund Supermarket

City of London

As the new tax year approaches, it’s time to make decisions on which investment companies to make use of in the coming year, especially given the restrictions placed upon the number of ISA providers that can be subscribed to in a single year.  This year I will be personally changing my approach and moving to a fund supermarket and here is why.

Diversifying A Portfolio Through a Fund Supermarket

In the first case, fund supermarkets tend to offer a much wider range of funds to invest in than other forms of investment companies who focus upon their own funds.  For example while the fund supermarket Fidelity offer their own range of products and funds, opening an account with the institution means that the investor is able to invest in fund managed by a whole range of providers thus allowing for greater diversification.  This is especially useful for UK investors looking to hold multiple funds without diversifying outsideof an ISA.

Investment Cost Reduction Through Fund Supermarkets

While many investors will suffer from having to pay both an initial charge and an annual management fee, the fund supermarket is one way in which the cost of investing may be lowered.  In many cases fund supermarkets offer a reduced initial charge and in some cases it is possible to see the initial investment fee waived altogether. 

Investors should however be cautious as in some cases the initial investment fee of a fund is levied through the spread, the difference between the buy and sell price of a fund.  In such a case even a 0% initial change on the behalf of the fund supermarket will mean that there is no true discount.

Consolidating Investments in a Fund Supermarket

The major advantage of a fund supermarket may be seen as the ability to see one’s entire portfolio in one place, this can save significant amounts of time and effort if making use of a large number of fund providers.  Not only do fund supermarkets allow investors to place money with a large number of providers, most fund supermarkets offer a consolidation service allowing investors to transfer existing funds and ISAs into the account with minimal or no fees at all.

So if you are looking for an easy way to invest in a diverse range of funds in one place, the benefits of a fund supermarket may considerable and worthy of further investigation.  However, before making the leap, be sure to research the provider before placing your money considering whether cost savings are genuine and whether the range of products and services offered meet your individual investment needs.

Natural Resource Funds: JP Morgan Natural Resources Vs Blackrock Gold and General

Nodding Donkey Oil Wells Wyoming

Keeping a proportion of your portfolio in natural resources may be a bit of a no brainer, the fact that natural resources are limited by their very nature makes such investments attractive enough in times of economic prosperity.  However, as investors seek to park their money in safe assets such as precious metals in more turbulent times, such funds can also add defensive value to a portfolio.

However, the composition of such funds can be widely varied with different geographic focuses and different corporate compositions which result in a very diverse fund experience.  Here we will now look at two key funds linked to natural resources with very different focuses, JPM’s Natural Resources Fund and Blackrock’s Gold and General Fund.

JP Morgan Natural Resources Fund: Composition and Performance

Of the two funds, this is the older and more diversified dating back to 1965 and currently run by fund manager Ian Henderson.  The fund embraces a number of sectors including base metals, precious metals as well as investments in the energy sector.  Household names in the fund include Rio Tito (3.5%), Kinross Gold (2.0%) and Canadian Natural Resources (1.6%).  While the fund is fairly well diversified from a geographic perspective, the major concentration is in North America with 41.8% of the fund invested in Canada and the USA.  Other large beneficiaries of the fund include the UK at 24.7% and Australia with 16.6%.

From the performance perspective, the results have been mixed.  Over the past ten years investors have seen growth at a staggering 570.90%, a figure which falls to 38.97% in the past five years.  Looking specifically at the past five years a pattern emerges with the fund outpacing the sector average in positive years but doing worse than the average in more challenging times.  This still means however that the fund has outperformed the sector for three of the past five years in total.  Considering the cost of the fund, the fund has an initial charge of 4.25% and an annual management charge of 1.5%.

Blackrock Gold and General Fund: Composition and Performance

As for the focus of this fund, the clue is in the title with the fund giving a specific focus on gold and precious metals rather than a more diversified range of natural resources.  As such, the fund may be seen as having a much higher defensive value for those looking to hedge against economic uncertainty with precious metals related investments.

The fund has a strong track record and has been in existence since 1988 and is currently managed by Blackrock’s Evy Hambro.  For the sake of comparison, the fund is benchmarked against the FTSE Gold Mine sector.  In terms of composition the fund is invested in mining and related equities with 75.5% of the fund is invested in gold and other large investments in silver (11.2%) and platinum (4.5%).  In terms of companies, well known ventures include Newcrest Mining (8.0%), Goldcorp (6.0%) and Randgold Resources (5.6%).  Like JPM’s fund, there is a significant investment in North America with 53.6% of the fund being invested on the continent.  Other areas of investment include Europe (20.0%) and Australasia (9.5%).

Considering the performance of the fund, Blackrock’s offering has delivered growth of 87.5% over past five years compared to the sector average of 11.1%.  Generally, the fund has outperformed the relevant sector average, however this comes at a cost with a 5% initial charge and 1.75% annual management fee.

So if looking to invest in natural resources, both JPM’s Natural Resources Fund and Blackrock’s Gold and General Fund very different angles, both of which are worth considering.  For those looking for true diversification in one fund with slightly lower charges, then JP Morgan’s fund may be the better option.  On the other hand, if looking for a solid investment in precious metals, Blackrock’s Gold and General Fund may be more suitable option.

Supermarket Credit Cards Are They Value For Money?

Tesco Supermarket

There isn’t much you can’t buy in the supermarkets these days and this includes financial products and services.  However, despite all the inducements to take out a store branded credit card with the promise of extra reward points and promotional offers the real question should be, how do such cards compare to the market?

Example Supermarket Credit Card APRs

Sainsbury’s Bank – This supermarket offers one of the lowest costing credit cards in the market with the Sainsbury’s Low Cost Credit Card having an APR of just 6.9% making it one of the few cards to have an APR less than10%.  However in order to qualify for the card you will need to be an existing Nectar Card holder and have a good credit rating.  The supermarket also issues a number of other cards at the 16.9% APR level and a Gold Card with additional benefits at 20.1% APR.

Tesco Finance – This supermarket issues its own Tesco Clubcard Credit Card with a representative APR of 16.9% making it comparable to most standard cards offered in the supermarket sector.  As with all supermarket offering, the card it heavily linked to in store offers and the supermarket’s Clubcard loyalty scheme offering shoppers the chance to earn additional points on purchases.

M&S – The standard M&S credit card come in slightly cheaper than the standard offering of both Tesco and Sainsbury’s at 15.9% APR.  In addition, shoppers also receive an extended interest free period of 55 days assuming previous balances have been paid in full.  Additional benefits include the ability to collect “M&S Rewards” and card holders can upgrade to receive additional features for a monthly fee.

How Do Supermarket Credit Cards Compare To The Market?

In shopping around, don’t just compare supermarket credit cards with one another, here are some examples of typical rates which may be received on a range of credit cards from cards for poor credit to credit cards designed for online use:

• Mastercard Aqua (Poor Credit) 35.9% APR
• Visa Granite (Poor Credit) 34.9% APR
• RBS Your Points (Standard Card) 17.9% APR
• Capital One Click Card (Specialist Online Card) 9.9% APR

Overall, one can see that the supermarket offering come in pretty middle of the road with rates slightly cheaper than some high street banks but not in all cases offering consumers the best deal.

So if looking for a credit card, the supermarket offering is certainly worth a look.  However, in making you decision, think about the cost in terms of APR and consider carefully the real value of those extra points and promotional offers.