What’s it worth?

Date Published:16/04/2009

Over the past few days, whilst we were all preparing to ‘shut up shop’ for Easter, I noticed a thought provoking story in the press.

We have all been advised that the value of fake One Pound coins in circulation could be as high as £73,000,000, or one in every twenty.

There are numerous ways of checking if the coins in your pocket or purse are real or not. I’ll leave you to find this information.

This information made me think about an often forgotten fact when considering investment returns.

The longer your money is not accessible to you, the greater the return must be in order to compensate you for the lack of access to your own money.

It’s really easy to see this happen in practice when you look at the different rates available from bank and building societies.

You will generally receive a lower interest rate for instant access than you will if you are prepared to deposit your money for a fixed term of 12 months.

Very often this fact is forgotten by many when considering where to place their investments.

We can all see that investments such as fixed term or notice deposits are less liquid than instant access accounts.

However, have you considered other investments you may hold such as property funds, investment properties, hedge funds, guaranteed stockmarket investments or any other investment where there is even a remote possibility that encashment of your investment could take some time.

There are investors who have been waiting to receive their sale proceeds many months after instructing a sale of their holding. These same investors have not been rewarded for having their money tied up.

For me, one of the main considerations when assessing any investment for clients is, how marketable is this investment, how quickly can it be sold?

I would urge investors to consider this, and read the small print of any potential investment, prior to investing your money. Don’t wait to find out when it’s too late.

Make sure that your investment advisor is doing this too and really is acting in your best interests.

We have also recently seen that the UK Government seems likely to continue to protect account holders in banks to the maximum of £50,000, under the Financial Services Compensation Scheme.

Investors should be aware that not all deposits in non-UK banks are covered by this scheme and also that the £50,000 maximum also includes any interest due but not paid on your account.

My suggestion is to make sure that you don’t exceed the £50,000 and also that you make an ‘allowance’ for the unpaid interest on your account.

Make sure you don’t lose out but don’t forget that there are many overseas banks that are far more secure than many British banks. You may remember me telling you that the World Economic Forum places UK banks 44th out of 134 countries for soundness and that this places UK banks behind those in Peru and El Salvador.

After all the Easter chocolate, I hope this is food for thought!

balanced stones