The Best Investment You’ll Ever Make

It’s a balmy 22°C under my sunshade, palm trees are gently swaying in the breeze, and a few short yards away the sea looks enticing. Greetings, in short, from the golden sands of Fuerteventura.
Why am I interrupting this well-earned spring break in order to write these words? Because, sipping a glass of wine and letting my brain freewheel, I’ve just been getting stuck into one of the most important jobs that I’ll undertake this year.
Namely, doing a bit of financial and investment planning for the year ahead. And, just as importantly, for the tax year ahead that is just beginning.

Thinking time is precious

You might think I’m barking. Why am I giving up valuable vacation time in order to think boring thoughts about money and investments?
For several reasons, in short.

First — and call me sad — I don’t find it boring. Second, it needs doing: financial and investment plans don’t create themselves. And third, because I find holidays and short breaks away to be ideal times to let the mind wander, and think about all this stuff that needs thinking about.
Plus, of course, it’s an ideal time to catch up on some of the reading that informs that thinking (and, in this digital age, some of the online videos and blogs I’ve bookmarked or downloaded over the last few months).
Put another way, free from the day-to-day pressures of the daily grind, it’s possible to not only put some quality time aside, but also use that time to reach better and hopefully more profitable decisions.

Taxing decisions

Decisions about what, exactly?
In part, as you’d expect at the start of a new tax year, some of the thinking is about how best to take advantage of the various tax shelters and wrappers that the government offers as an incentive to save.
For me, these chiefly revolve around pensions savings and ISA allowances — as I’ve never found Venture Capital Trusts to my taste, although that’s a purely personal preference. Likewise, while AIM shares can be a handy way of sidestepping inheritance tax, that isn’t high on my priorities at the moment.

Pension planning

Take pension provision, for instance. Every year, the pundits in the media point to boosting pension contributions as a way of minimising higher-rate tax liability.
As advice, it’s absolutely spot-on. But completely useless if you get to the end of March next year, and don’t have ready cash in hand to take advantage of the government’s largesse.
In which case, instead of putting money aside to help secure a comfortable old age, you’ll be steeling yourself for another dollop of your hard-earned dosh going to the taxman.
My own approach — and there’s nothing particularly scientific about this, it’s just what I happen to do — is to squirrel away a fixed sum each month, and build up (or budget for) a lump sum that can be thrown at the pension towards the end of the tax year, when it’s possible to take better stab at end-of-year tax liability.

ISA conundrum

Something else that I’ve been thinking through is how I plan to take advantage of the coming year’s ISA allowance.
There are various things to think about here. Which ISA ‘wrapper’, for instance, and from which provider? What investments to place inside that wrapper? And how to phase the contributions that I wish to make to the ISA?
The latter, I think, is particularly important — because I find that if I don’t put so much aside each month, it can be difficult to find lump-sum investments towards the end of the tax year.

In short, as with pension planning, I tend to favour a mixture of regular savings and lump-sum payments, with lump-sum payments timed to take advantage of turbulent market conditions.

The bigger picture

It’s not all about the coming tax year, of course. A short break away is a good time to reflect on questions that are quite unconnected with tax.
Broad-brush questions regarding asset allocation, for instance. Take my S&P 500 and Nikkei 225 index trackers, which have performed well. Should I continue to hold — or switch to other markets? In my opinion, Europe is certainly more reasonably rated at the moment, thanks to euro-deflation and the antics of the new Greek government.
And what of those shares on my ‘must investigate’ list? With nothing to do before the evening meal, now’s a good time to check a few out.

Plan, don’t panic

Sad? Well, possibly. But holidays are a time for self-indulgence, and — frankly — I’m enjoying what I’m doing. You might not enjoy it, or might not enjoy it as much.
But the real point is this: it’s better to have a plan, and a strategy, than to not have a plan or strategy. Last-minute rushed investment decisions are never as good as those that have benefited from careful thought and research.
Don’t leave it too late. Put some time aside, and plan accordingly.

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