Tax year tips and investment codpieces

Welcome to a week so dreary that people knew that a Royal Family photo had been amended because nobody in Britain is actually smiling that much right now. When is it going to stop rainiiiiiiiiiiiiiiiiiiiiiiing??

However, if we can’t be cheerful, we can at least minimise the amount we send the taxman and so, DING DONG, this is your reminder that the end of the tax year is upon us. Just 3 weeks left to sort your finances into immaculate shiny folders of gorgeousness. Or OK, maybe just stick a tenner in an ISA? Tune in next week for your full report on money-saving tax-busting tips.

Which account to use?

If you want to get a move on, you can check out our Best Buys ISAs, Pensions, Junior ISAs and Lifetime ISAs for 2024.

Brain fry about which to pick? ISAs are the no-brainer, tax-free starting place for most of us. Pensions can and should get some of your attention. Yes, they're locked away until you're 55+, BUT you get lovely juicy top-ups from the Government and so are the Savings Wonderbra, plumping up your assets.

Junior ISAs are for the nippers and are good for nice grannies and grandads, or rich parents who have used up all their ISA allowance. And Lifetime ISAs are great for the under 40s who know they are saving for a first property, or the self-employed who are saving for a property OR retirement.

They're not mutually exclusive and you can have them all. I have an ISA for medium-term stuff, but it’s accessible if I need it. I have a pension because I like the nice tax refunds I get. I pay into Junior ISAs although I'm nervous about Cost Centre Number 2 turning 18 and heading to Thailand. And I know you will find this hard to believe, but I’m just a smidge too old for a LISA. But if I KNEW I was definitely going to buy a first flat at some point, I would be all over this.

And what to put in it?

If you are looking for inspiration of what funds to actually stick into these accounts, then I'll flag our monthly round-up of best-selling funds. It’s an ongoing story of technology, AI, India, and low-cost passive funds.

Interestingly, bonds and cash funds are being shunned as investors remain happy to take risk (by which I mean owning shares, not playing chicken on the M4). Even though I wrote it myself 😊 I humbly suggest it’s worth a read for anyone wanting to digest key global trends and consider their investment choices moving forward.

Scottish Mortgage announces largest ever ‘buyback’

Finally, for those readers who do follow the markets, news is out this morning of a hefty £1bn share buyback from Scottish Mortgage.

Scottish Mortgage is effectively a company whose business is buying and owning shares. (This is an ‘investment trust’). They're currently worth less than the value of the shares they own. It would be like me setting up Holly Ltd – and buying £100 of various shares – but people saying I was only worth £85. This happens when people feel a bit unenthusiastic about a company and when it’s not in favour. In investment trust land, this is known as ‘trading at a discount.’

Scottish Mortgage was the darling of retail investors for years, holding popular shares like Amazon, Tesla and Nvidia, and they went gangbusters during the pandemic as the appetite for these shares was strong. However, as interest rates started to rise, investors’ appetites for risky shares waned a bit (“I could buy that collection of risky shares for £100 and hope to make £10 this year OR I could bung it into cash and know that £100 will turn into £106… hmmm, maybe I’ll play it safe”). You can see that when interest rates are 2% and cash would make you just £2, that the potential upside of shares makes them a relatively more appealing risk.

Scottish Mortgage also holds some shares which are not listed – so they're privately owned, which makes people nervous about the valuations. How do we know that Cool Whizzy Tech Inc. is indeed worth £1 billion? Who says so? At least when a share is on a stock market, we know what it is worth at any second. About 26% of Scottish Mortgage assets are privately owned, which you can either see as brilliant diversification or sweat-inducing risk.

Many of our readers will own Scottish Mortgage and some will have been on the rollercoaster from about £15 to £6.28 and back up to about £8 today. A share buyback is probably the investment equivalent of a codpiece – it’s a statement of confidence to the market and a swagger. It's literally when a company buys its own shares – and for Scottish Mortgage, it’s also a chance for them to buy themselves at a discount. They say that their aim is to “identify, own and support the world’s most exceptional growth companies”, which they obviously now think includes themselves!

The group has always been very clear that they're a long-term volatile play. They funded a new patio for me in 2021 and I like the management’s ethos. I’m going to hang on for the ride.

Have a lovely weekend everyone,

Holly

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