Money news, advice and predictions for savers and spenders.
By Jeremy Gates
As a new year begins, the search for shares and managed funds with 'hot' prospects will continue for small investors seeking to supplement their income.
In the Noughties, the decade which has just ended, the game lost much of its sparkle.
It's been a grim time for shares, especially those in banks once seen as solid and reliable such as Lloyds TSB, Royal Bank of Scotland and HBOS.
In 30 months of financial mayhem since mid-2007, income and capital gains from shares have plunged. Well-regarded 'blue chips' sank too, although many bounced back in the 54% surge by London's FTSE 100 index since March.
The turmoil may not yet be over. Savers nearing retirement may be reluctant to touch equities at all, in case they sink to the lows that London prices hit in early 2009.
Despite the doom and gloom, however, small investors still hold £162 billion of shares, says Capita Registrars.
And with minimal returns from rival investments such as property and and savings accounts, people trying to build a lump sum to allow earlier retirement or a fatter pension income will want some money in shares - or funds which hold mostly stocks.
Caution is the watchword with most pundits.
Nobody knows how share prices will respond when the Government's policy of quantitative easing is eventually switched off.
"Over the course of 2010, we will see further examples of liquidity measures being withdrawn," says Richard Buxton, head of equities at fund manager Schroder.
"The big question is, can the struggling UK economy weather this reversal in policy successfully?"
Jonathan Jackson, head of equities at broker Killik & Co, has some FTSE 100 giants in his 'Top Ten for 2010', including GlaxoSmithKline, BG Group, Barclays, Imperial Tobacco, hedge-fund manager Man Group and FT owner Pearson.
Most of these pay good dividends, around 5%, even if capital growth may be limited. Killik's high-yielding portfolio, with firms from the FTSE 100, Mid 250 and Small Cap, pays an average dividend of 5.7%, with limited downside risk short of financial armageddon.
Killik predicts the FTSE 100 will be at 5,850 by the end of 2010, about 8% up on the current level of 5,400.
It also likes technology firms Autonomy and Imagination Technologies, believing both might increase sales despite problems in the UK economy.
Richard Hunter at discount broker Hargreaves Lansdown is slightly more hopeful.
He sees the Bank of England base rate at 1.5% by December 2010, against 0.5% today, and the FTSE 100 around 6,000 in 12 months' time.
He plumps for BP (paying 5.5%), Tesco, Home Retail (owner of Argos/Homebase) and one of the pharmaceutical giants, either GlaxoSmith Kline or AstraZeneca.
Among 'tiddlers', he likes Davis Service Group, a £700 million company trading as Sunlight in the UK and Ireland to provide and uniforms and workwear to a range of companies.
Looking globally, Hunter thinks 2010 could be the year when the economic might of China is widely recognised.
At The Share Centre, chief executive Gavin Oldham says 2010 will be the year when Britain parts company with other developed countries as "all that overspending comes home to roost".
He thinks the FTSE is to some extent insulated against this, because 70% of earnings of member firms come from abroad.
Oldham, who thinks the 100 will be 5,450 in December 2010, says retailers and companies with "a more domestic franchise" are more at risk.
Despite that warning, retailers seen as 'buys' by The Share Centre include Halfords, Marks & Spencer, Tesco, DSG (Currys, Dixons, PC World) alongside Vodafone, Whitbread, drinks group Diageo, pawnbroker Albemarle & Bond and Cadbury, enmeshed in a multi-billion takeover.
Henk Potts, investment strategist at Barclays Wealth, tips BT (with 177p as a fair value target), global advertising firm WPP, Standard Chartered (a bank exposed to Asian growth), Home Retail Group and engineer GKN.
However, highly-regarded fund manager William Littlewood, who runs the Artemis Strategic Assets Fund, urges investors to look beyond the UK in 2010.
"Although London-quoted shares are our hunting ground, the message in the UK is that growth really is mediocre," he says.
"Other parts of the world will deliver much faster growth in 2010, so we will continue to avoid UK-centric stocks and invest instead in UK companies that have most of their activities overseas. Some British companies doing this are 'best of breed'."
Tim Steer at the Artemis UK Growth Fund is backing firms focused on change - among them oil minnow Sterling Energy, listed on London's junior AIM market, where "a highly-regarded management team has joined and refinanced the company to focus on huge potential in Kurdistan and Cameroon".
He also likes Ricardo, focused on improving fuel efficiency for the automotive sector.
Peter Saacke, fund manager at Artemis Global Growth, thinks 2010 will deliver higher income from shares as dividends recover. His core holdings include Cobham, Northumbrian Water and Imperial Tobacco, which all have new chief executives taking over.
"The continued emergence of outcome 'less bad than feared' will be enough at least to sustain current market levels," he says.
In an atmosphere of huge uncertainty, there are obvious attractions for any investors in making monthly payments into managed funds: if share prices suddenly dip, investors buy more shares with the same monthly subscription.
Choosing a specialist fund is also an easy way into global markets where most investors know little or nothing about specific shares.
Fans of Asia might like the First State Indian Subcontinent Fund China, invested in India, Pakistan, Sri Lanka and Bangladesh and tipped by The Share Centre. As a manager, First State has a long-term track record in the region, notably with its Asia Pacific fund.
Emerging markets boomed in 2009, notably the 'BRIC' chain of Brazil, Russia, India and China.
Neptune's Russia & Greater Russia, launched five years ago and heavily invested in oil, mining and gas companies, was a top-performing fund in 2009, soaring by 107%. Alliance RCM BRIC Stars had another great year with a 80% surge.
Can they keep it up? As the developing world continues to grow, demand for raw materials grows too - which might be a case for backing JP Morgan Natural Resources, a fund up by more than 600% in the past decade.
Virgin Money's Investor Intentions Index says emerging markets pushed UK shares in second place in advice given by financial advisors during 2009, but some doubt that this surge can be maintained.
In any case, investors badly bruised by 2007-09 might choose safe and solid funds for 2010, rather than those set to soar.
My own inclination is to go for global income funds like M&G Global Dividend, while few ever bet against Invesco Perpetual High Income, one of my ISA choices for last year.
Invesco Perpetual's star manager Neil Woolford invests primarily in companies listed in the UK, with the balance invested internationally. That's good enough for me, and a bit more attractive than a savings account with Abbey or Lloyds TSB.
:: Information: The Share Centre (01296 414 141 and www.share.com.); Killik & Co (020 7337 0520 and www.killik.com); Hargreaves Lansdown (0117 900 9000 and www.H-L.co.uk).
Poundnotes
:: Although half of consumers will chuck away unwanted Christmas gifts this year, some 25% will try to make money from them instead. Three-quarters of those who sell them will do so online, while a third will flog them at car boot sales instead.
"Consumers have woken up to the amount of money wasted at Christmas with unwanted gifts thrown into a cupboard or into the bin," says uSwitch.com personal finance expert Louise Bond.
She also thinks that many who receive gifts might try to exchange them for something they prefer at the shop, if donors can produce proof of purchase.
"Most retailers have a 'goodwill policy' allowing consumers to get a refund or exchange," she says.
:: Apply for a Nectar card by February 28 and Sainsbury's Finance offers loans of £7,500-£15,000 at a market-leading rate of 7.9% APR typical. The website MoneyExpert.com puts the average rate available at 10.3%, so Sainsbury's offers a 20% discount.
:: More than 4.5 million Britons will move more than £3.2 billion between different credit cards in the first quarter of 2010, says research from Santander Cards. That's an average £1,140 per person, significantly down on the £2,290 shifted in the same period in 2009.
"The number of people transferring balances has risen year on year, while the amount transferred has fallen dramatically," says Santander Cards director Emma Roberts.
The Santander Credit Card offers a best buy 0% on balance transfers for 15 months, plus 0% on purchases for three months and competitive ongoing rate of 15.9% variable.
:: The average household faces an annual energy bill of £1,239 - a £327 or 36% increase from the beginning of 2008, says uSwitch.com energy expert Will Marples.
But he says substantial savings are made by consumers who move to dual-fuel supply (both gas and electricity from the same supplier), pay by direct debit or sign up to online plans.
USwitch enquiries: 0800 093 0607 and www.uSwitch.com.
:: High-five savers
Phone No Rate Account Period Deposit Interest paid
State Bank of India 0207 454 4315 5.25% (F) Five Year Bond £10,000 Yly
Halifax www.halifax.co.uk 5.15% (F) Web Saver Five Years £500 Yly
Investec Bank 0845 366 6333 3.32% High 5 Three Month (P) £25,000 Yly
Cheshire BS 0800 195 1514 3.25% 30 day Postal Saver 30 Days (P) £1,000 Yly
First Save www.firstsave.co.uk 3.25% 90 Day Notice 90 Days £5,000 Mly
:: Top-five borrowers
Phone No Rate Period Max% Adv Fee Incentive
HSBC (Rem) 0800 494999 2.49% discounted for two years 60% £999 Yes
First Direct 0845 610 0100 2.68% variable for term 65% £999 Yes
ING Direct (UK) 0845 603 8888 2.89% for term 75% £695 Yes
Furness BS 0800 220568 3.49% for three years 75% £499 Yes
Post Office 0800 707 6204 3.59% variable for term 80% £599 Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
