A shortage of credit, interest rates going up even as the Bank of England base rate goes down, and a collapse in house prices. All in all, it’s not the ideal background for going out to get yourself a mortgage. This week I look at how to get the best deals you can … and whether you need to think a little laterally.

First off … do you REALLY want to buy a house? And do you really want to buy one now, in a falling market? Nobody knows how bad things are going to get in Britain, but people are now seriously talking about a 25% drop in prices.

A good idea might be to put it off … rent for a year instead, because prices certainly have lower to go.

If you can put off purchasing for a year … Save hard … there are some great savings rates just now that DON’T demand you put your money away for years. This is because the retail banks are desperate to get deposit cash in to finance their lending … because of course if banks can’t lend, they can’t do business.

Eye popping deals at the moment include 10% from the Halifax. If you can tighten your belt and salt away a few hundred each month towards a mortgage (or toward paying down your current mortgage) you will be in a much better position to buy when the market starts looking healthy again.

And the more you stash away, the bigger your deposit. That means you’ll be ahead of the pack – with so few mortgages available it’s much easier to get a 60% mortgage than a 70% one say. We can wave goodbye forever to the 100% and 110% deals that were on the table until recently. Further, the more you put down, the less your risk of getting into negative equity.

But you probably don’t want to hear ALL that … especially if you’ve been renting for years, watching your first time buy recede ever further out of sight. And anyway, providing you’re happy to swallow a further drop after you’ve purchased you can nab a very good deal. After all, if the flat was £200,000 last year and you get it for £150k, who cares if it drops another £10k … long term the market will rise again.

The two things you need TO MAKE A PURCHASE OF COURSE, are a property to buy and a mortgage to fund it.

The good news is that this is definitely a buyer’s market and the one group that unequivocally benefits in such a market is the first time buyer … because they don’t have a depreciating asset of their own to sell. And there are mortgages out there – current standard variable rates are around 6% (that’s 1% over the Bank of England base), while you can get slightly under if you’re prepared to tie yourself to a fixed rate for 2, 3 or even 5 years.

This is the time to drive very hard bargains. Make a silly offer for the property you want … they can only say no. And if they say no, remember there are plenty more properties on the market. NEVER make the mistake of getting too attached to a property you haven’t bought yet. I’d stop short of gazundering … which is a nasty trick to play on anyone, but never be embarrassed at paying as little as you can.

And if you have understanding parents, then this is a good time to borrow. No, not in order to pay over the odds, but to snaffle some of the great current bargains around. The bigger the deposit you can put down, the better your chance of getting the best deal mortgage.

And always remember. There isn’t a single property market, there are dozens. Think laterally again … which are the parts of the market that are REALLY distressed. It’s not lovely Victorian conversions that always hold their value, it’s the by the thousand city centre one and two bed new builds. Builders cannot get them off their hands quickly enough. But they’re not going to knock them down, they HAVE to sell them. Find a development that you think has potential – in a good site, near a station and shops (all the fundamentals in fact) and put in a silly offer.

Now how to get the mortgage best deals. Forget the brokers … I would always have advised a borrower to go to a broker, as these guys could cut through the thousands of mortgage products on the market, finding the best deal for YOUR situation. The chances of you finding the lowest interest rate were a needle in a haystack job.

But the number of mortgage products on the market has dropped by more than half over the past year (a huge number being withdrawn from the market in the last couple of months alone). And banks simply aren’t putting their best deals through brokers any more.

As the banks themselves are finding it hard to borrow cash on the wholesale markets, which means they haven’t got enough mortgage cash to supply customer demand, then why would they pay commission to a broker to hook in new customers?

Instead, they’d rather customers walked through their doors and THEY kept the commission. They also figure they can sell you all the add-ons that make them the REAL money if they’ve got you in the branch.

By all means go to a broker to see what he can come up with, then use that figure as a baseline to shop around.

There are LOADS of good finance sites with the latest and best mortgage deals, but start your search for the best rates with moneyfacts.co.uk. You WILL have to spend more time than previously on researching a deal, but that’s no bad thing.

Brokers will tell you that you should use them because they can offer expert advice. But … how much advice do you need?

You DO need to assess the full cost of the mortgage after lock-ins, arrangement fees, early redemption penalties and the rest are factored in, but then educating yourself about this stuff isn’t a bad idea anyway … If only MORE of us had educated ourselves about the real cost of our credit, Britain might not be in such a financial mess now.

In summary then … get a big deposit, hammer the seller on price, and ideally don’t have a property of your own to sell. Happy hunting!

Link: Mortgage Compare, Mortgage deals

Last week I looked at penny shares and was, in the eyes of some readers, rather scathing about them. It’s not to say penny shares won’t grow (every share was a penny share once), more that your chance of picking the 1% of winners rather than the 99% of duds, is slim indeed. Precisely the opposite obtains for Blue Chip and Dividend shares. But first, let’s define what we’re talking about here.

Among the definitions I found in a quick search for ‘blue chip shares’ are ‘Shares of a company known for its ability to make profits and which pay a dividend in good times or in bad.’

Then there is ‘shares in quality, stable companies that have paid regular dividends in both good and bad years’. We’re talking about the giants of the stockmarket, companies that have been around for decades, like BT, British Airways and Marks & Spencer. We’re talking BP, Barclays, Royal Dutch Shell and Vodafone, companies with market capitalisations in the billions of pounds, and with share prices not in the pennies but the pounds.

And these are the shares that the penny share buyers avoid. Why? Because you’ve missed the boat, they will say. There is no way that BT or HBOS is going to rocket in value in the way a new company will. These are solid, dividend yielding shares, and people make them the bedrock of their share portfolios for just that reason … they will deliver slow and steady growth over the years.

That’s not to say that blue chips can’t be volatile. Anyone looking at bank shares at the moment, particularly the hapless Royal Bank of Scotland, might figure that the gig is up.

RBS is down From around 530 pence a year ago to around 250 pence a share now. Venerable Barclays down from more than £7 to less than £4. BT Group has dropped from 320p to around 220p in the same period, while Vodafone has seesawed from 160p up to around 200p to end up … well pretty much back where it started a year ago.

So why bother buying them? Well first of all you’re not buying M&S or BT shares to sell them a year later – you’re buying them to hold, to give you that slow and steady growth we talked about. And over time all those little (or even large) blips in the price graph will even out – you’ll forget all about them. You also won’t waste time checking the share price each day and you won’t waste money on trading commission, beacuse you won’t be buying and selling them.

The FTSE 100 index, the hundred companies quoted on the London Stock Exchange with the largest capitalisations, started in 1984 with a value of 1000p.

It’s soared and plunged from time to time and is going through a rocky period just now. Nonetheless in June 2008 it stands just above 6000p.

And while there have been a number of companies ejected from the FTSE down the years, the collapses have been few and far between. There was the infamous Railtrack failure and the collapse of British and Commonwealth. Generally though, these giant companies have been swallowed up by even bigger ones – Bank of Scotland into HBOS, Enterprise Oil into Royal Dutch Shell, the biggest of them all.

So failure is rare, and even if growth is slow and steady and boring, that’s only half the story.

Maybe your stock is only climbing 5% a year, but these blue chip shares will pay a dividend – give you an income in other words.

The super rich, those fortunate souls who inherited a couple of million in stocks from their grandpa, may never buy or sell their shares but simply live off the income from dividends. Because even if the share price drops, the blue chip companies are almost certain to still pay the dividend each year.

If you, rather than spending that income, simply invest it in more stock, then that’s where REAL growth kicks in. And over the past century, the markets have delivered around 9% a year … ASSUMING investors reinvest their dividends.

NOW … that 9% compounds each year. That would mean that if I popped £7,000 (which is the current yearly ISA limit) into shares at age 30, and ignored them till I retired at 60, I would pick up around £90,000. More realistically, pop 7k into my ISA for each of those 30 years and my £210,000 investment will be worth 1.1million. I haven’t bought or sold, as these are shares to hold, so I’ve minimal dealing costs.

Many successful investors have profited from this ‘buy and hold’ policy, not least Warren Buffett, who obviously knows a thing or two.

There’s more to it than that of course – with Buffett also being a past master at value investing, looking for shares that he believes are fundamentally undervalued.

But after that, it’s buy, hold and watch yourself grow rich. Rather than chasing the dream of penny shares you could do much worse than making dividend yielding blue chips the bedrock of your investment portfolio.

In future editions of Walletwatcher, I’ll also be looking at how to find value shares, and how to identify high yielders … to make the pot grow even faster. Next week, as credit gets crunched harder I’m going to be looking at some creative ways to raise the mortgage you want.

Links: Stockmarket overview and live prices

Tags: Blue chip shares, Dividend shares, Financial budgeting, Stockmarkets, shares, personal financial advice

My article this week looks at penny shares, which have been cropping up since time immemorial as a brilliant ground floor stock market opportunity.

In fact, I’m looking at an advertisement for a tip sheet now which talks about penny shares they have punted over the last year, some of which have doubled, even tripled in value… they mention 10 shares which have risen by an average of more than 200%, against the top ten shares on the FTSE rising by an average of just 67%.

It’s certainly appealing to those of us wanting to make money from shares. And it’s all undoubtedly true… but CERTAINLY not the whole story.

First… what are penny shares. These are stocks that have an ultra low price, often just a few pence apiece, as opposed to the typical share, with values in the tens or hundreds of pence.

The appeal is obvious. They offer a cheap way in to the market, and they apparently have lots more potential to rise – after all a 5p share has to have more growth potential than a 500p share, right?

This totally relies on people’s perception that they have ‘missed the boat’ with big blue chip shares. That it’s now too expensive to get into BT, Cadbury, HBOS, M&S and the like. Why buy at the top of a market when you can get in at the bottom.

And it’s true that all blue chips started as penny shares, some not so long ago. Microsoft and Cisco Systems were penny shares within fairly recent memory… so why can’t you get in on the next big surge.

A big problem here is lack of information. These shares are generally of companies that aren’t listed on the major exchanges, such as the FTSE 100.

They don’t have to disclose the same data on directors, performance and the like as the Blue Chips. So not only will researching them be hard, but misinformation can be rife.

In short, many of the tipoffs so beloved of small investors – that Inahole Mining is just about to strike the motherlode, or that Hadja Chips has just developed a miracle new microprocessor that Intel wants to buy – are nonsense. Lies, made up by pump and dump merchants.

Pump and dump works like this.

A person buys a stack of the worthless company stock, and starts spreading a rumour to PUMP the price.

The rumour attracts naive punters, on whom the pumper then DUMPS his stock at the inflated price… And swiftly exits. Unethical and sometimes illegal, but very hard to prove. Boiler Room share operations specialise in pump and dump.

Another big problem is lack of liquidity. These shares are cheap, in large part, because nobody is buying them. And if nobody is buying, then you’re going to have a big problem selling them if you need to. Prices are just nominal until somebody actually buys – if nobody will trade with you then your stock is worthless.

It’s also a nonsense just to value on price. I know the ersatz Mars Bars from LIDL are much cheaper than the real thing… I also know to my cost that there’s a reason for that. Price means nothing without measures such as earnings per share, assets per share and the like. VALUE in other words.

And talking about earnings per share – these guys aren’t going to be paying you a dividend, unlike blue chips. Remember, it’s not JUST about share price, it’s earnings too.

Ask yourself WHY this stock is a penny share. It may be on the way up, but it may be on the way down and out.

Also recognise that a low share price is invariably a reflection of a small cap (a company with small amounts of capital). Many of these small cap companies are newly formed and many new companies simply go bust (not a likelihood with BT or M&S).

And smaller companies, with smaller capitalisations and thus reserves and options when things go wrong, are fundamentally more risky than the big guys. They are likely to have a less solid infrastructure, and not to be so well run.

All of which sounds a horribly unadventurous and negative approach, I know. SOMEBODY has to take a punt on the future stars. But if you DO want to do that, don’t take shots in the dark. You might just as well start putting money on the dogs… any dogs, ignoring form and odds.

Find a sector you like or are interested in – it can be computers, green technology, retail, commodities, anything – and read, read, read. Educate yourself.

If somebody offers you a wonder tip on a new internet startup price comparison website, you’d ask yourself how likely that is to survive and make money in an already crowded market, wouldn’t you?

But say somebody has just won the contract to supply tracking technology for the London area congestion charge system. And you know that it’s a system likely to be copied around the globe. You might think ‘there are possibilities here’ might you not. Think about what will be big… the tipsters almost certainly don’t know any more than you. If they did why would they be telling you after all?

Sure you want to pick the next winner but ask yourself… how are you going to separate the winners from the dogs. How likely are YOU to get it right. Next week, I’m going to the opposite extreme. Blue chips and dividend shares. Less exciting but possibly a better idea. And my tips will be on putting your finances on autopilot… to save you time.

Tags: Penny shares, Penny shares article, Penny shares features, Penny shares article, penny shares, , personal financial advice

You might have thought with the credit crunch, personal debt in the UK rising above GDP for the first time and millions of UK householders facing major financial problems in the years to come – that Britain’s lenders might have developed a whisper of conscience, caution and common sense.

But an unsolicited letter that dropped through my mailbox this weekend reminded me that nothing has changed. Here is my credit card lender, the Halifax, sending me a sheet of credit card cheques – inviting me to start writing them against my Amazon credit card account.

We’ve had the Office of Fair Trading, which has been telling the banks to ‘crack down on irresponsible lending’. The Citizens Advice Bureau has criticised ‘banks lending money to people who unlikely to be able repay their debts’. Even Bank of England governor Mervyn King has slammed banks for ‘risky’ lending.

And it doesn’t get much worse than borrowing cash against your credit card, for this is what we’re effectively being asked to do here.

Am I being unfair? After all, the covering letter tells me that ‘this is a service that many customers find useful’ and that ‘they are particularly useful for times when you are not able to use your credit card’. Although the come-on to use them ad lib is plainly there when I’m told ‘credit card cheques can be used to pay for just about anything’.

But WHY would I do that? If a company or individual won’t accept a credit card, and I DON’T want to pay cash, then why not just write a cheque against my bank account? That, after all, is free – the only possible cost to me is a few days’ loss of interest on the sum leaving my account, and that’s in the unlikely event that your current account DOES pay interest. It certainly won’t be very much.

The ONLY possible reason is that you don’t have sufficient funds in your bank at present (in which case you CERTAINLY shouldn’t be buying credit at over 20%), or you don’t HAVE a bank account and cheque book.

Certainly there are some people in Britain in that boat, but anyone in that shaky a financial state ALSO shouldn’t be borrowing money at over 20%.

In fact NOBODY should be borrowing money at over 20%. Anyone financially astute just wouldn’t do it, which means the only people these dodgy products are aimed at are the financially illiterate or, bluntly, the poor.

Either way, it’s not right. But as we’ve seen time and again, it’s the poorest that pay the most interest. So the financially sussed pay off their credit cards each month, while the lower tiers of society are borrowing at sky high rates – as those are the only rates they can get!

How do credit card cheques work, and more importantly why credit card cheques are a rotten idea?

• You don’t get the interest free period, typically 56 days, that you do with a credit card (that’s assuming you pay off your bill in full and on time). Interest starts racking up from day of purchase (or at best from when the cheque clears). And it gets worse.
• My credit card rate is zero, and when my interest free holiday ends, the standard rate is 15.94%. But these cheques are charged at 21.95%, only marginally less than the rate on cash withdrawals of 22.95%. Horrific! I’d remind the Halifax that Bank of England base rate is 5%. Even with the interbank lending rate a couple of percent above that, this is a startlingly high rate of interest.
• Many recipients will whack on a handling fee, and some banks operate a minimum charge on these cheques. This is often another 2%.
• My covering letter tells me that these cheques ‘do not provide the same level as consumer protection as a normal credit card purchase’.

So one of the BIG pluses of a credit card, that your goods and money are insured, are summarily removed. You’re buying stuff from a company that refuses to take credit cards (odd enough nowadays) and the bank is removing your insurance against faulty goods or getting ripped off? I don’t think I will thanks.

So great was the chorus of disapproval about these dreadful pieces of paper, that there were changes made to the banking code THREE YEARS AGO to say that banks MUST offer customers an opt out.

But get this – the opt out option in my case (and that of my wife who received the same offer, on the same day) came in the letter accompanying the first sheet of cheques. So we couldn’t opt out without receiving them first!

And here is the real security horror. Credit card cheques are sent out unsolicited. Credit card cheques may be in the postal system, with your name on them, and you have no idea they even exist.

Post goes missing, and anyone stealing these can quite easily write a cheque and pay it into an account set up for the purpose. No PIN required, no signature check.

And if they are used to buy goods from an individual it’s a nightmare, as the vendor has lost his goods and you have lost your money. Try clearing that mess up. The first time you realise you’ve been a victim of fraud can be MONTHS later when you have a debt recovery outfit chasing you down.

So do yourself a favour. If you haven’t received CC cheques, call your issuer and tell you NOT to send them to you. And if you have – build a bonfire.

Related: Credit card cheques article, Office of Fair Trading

Tags: credit card cheques, credit card cash, uk banking codes

Times are tight and money’s tighter. But you don’t have to earn more to make ends meet … try spending less first. This week, with a major gulp for breath, I give you my top 50 ways to cut your spending.

1. Shop in LIDL, Netto or Primark … for many of the basics they’re just as good and a whole lot cheaper.
2. Grow your own – supermarkets charge you a mint for herbs, and growing your own fruit and veg is satisfying, healthy and green too – more at RHS Gardening
3. If you live alone, get a water meter. You use less than the average household, so pay less than the average household.
4. Put your regular bills on direct debit, you’ll get a discount from the utility companies such as gas and electricity providers.
5. Switch to a new power provider if you haven’t done so for a year or more. Check out uswitch.com for the best current deals.
6. And check out your phone tariff too … they change all the time, so make sure you’re getting the best deal.
7. Pay down credit card debt, or transfer it to a cheaper loan or overdraft.
8. Consolidate debt into one lump … there will be fewer management costs and it’s easier to get a TRUE picture of your financial position.
9. Get free stuff. Sites such as Freecycle is a green way to get rid of your free stuff and get free stuff in return.
10. Get free stuff from the shops. No, not shoplifting, check our regular pieces on free stuff online, typically promotions from big companies.
11. Check our voucher code archive too. Everyday companies offer money off if you type in secret voucher codes at the checkout.
12. Barter your talents with your friends. If you can do electrics and they can do gardening, then help each other out.
13. You can even barter online, with websites such as www.i swap.co.uk.
14. Save, whether it be in a pension or high interest account, property or investment trust. You curb your spending and your investment will grow and reap the benefits of compound interest.
15. If you’re approaching retirement age, give your money away to your family … a bit at a time. It’s tax efficient.
16. Get an ISA … not what they were but still the best tax free savings vehicle we have.
17. Haggle. Brits aren’t very good at it, but if you ask for a discount you might just get one.
18. Use your skills to teach others. Piano lessons, copy editing, those electrics again.
19. Check your tax code at Direct.gov.uk. Loads of us are on the wrong one. It could save you hundreds each year.
20. Buy travel insurance once a year, not for each trip … it works out much cheaper.
21. Pump up the tyres on your car. It stops wear and can knock 10% off your fuel costs.
22. Get your home insulated and save money on heating. And get your local authority to pay for it. Find out about grants at www.homeinsulationgrants.com.
23. Reduce your home insurance by fitting better locks.
24. Don’t reinsure with the same company year after year, you don’t get rewarded for it. Find the best deal at http://www.moneysupermarket.com
25. Sell unwanted stuff on ebay or Amazon Marketplace
26. Buy online, you can save money and save time.
27. Challenge those swingeing bank charges.
28. Cash in the attic? You may have antique gems among the dust. Check out what you’ve got and get it valued.
29. Turn down your central heating thermostat. Dropping it by 2 degrees, from 20C to 18C can save you hundreds a year.
30. Do your washing out 30deg instead of 50deg. Again, you’ll save a packet.
31. Rent out a room. The room that gets used only at Christmas could be helping you pay off your mortgage early.
32. Pay off your mortgage early … this does depend on you having spare cash, but compound interest means that relatively small amounts paid in now can make much bigger savings years down the line.
33. Check out offset mortgages such as the Virgin One account. Rather than earning rubbish interest on your savings (and getting taxed on what little interest you get) these pay off your mortgage quicker by giving you tax free savings.
34. Not been to the gym for more than a month? Cancel gym membership and save money.
35. Share your car, whether it’s giving and getting lifts or simply pooling with a neighbour.
36. Sell the car and sign up for one of the local car clubs such as citycar.com, or pickup and dropoff car schemes.
37. Remortgage. It isn’t the easiest time at the moment, but if you’re not in a fixed deal then you WILL be doing better by remortgaging.
38. Check all your direct debits and cancel the ones you never use.
39. Stop smoking … you’ll pay less for your life insurance.
40. Use Skype instead of your regular phone, especially for international calls …it’s free!
41. Don’t spend your supermarket loyalty points at the checkout … you can sometimes quadruple them by cashing them in different ways, such as redeeming them for goods or tickets.
42. Get an interest free credit card. Then the money you aren’t spending can be earning interest on deposit for you.
43. Shop around for the cheapest petrol.
44. Make a shopping list. That way you won’t be swayed by impulse buys. Two for ones are no use if it just means you have two guavas rotting in the larder instead of none.
45. And buy own brand, not named brand. Is Domestos REALLY any better than Tesco bleach? I doubt it.
46. Use price comparison sits such as pricerunner or kelkoo.
47. Tired out? You need a holiday. But shop around for cheap summer holiday deals, don’t stick to the obvious dates and fly at quieter times … you’ll save a fortune.
48. Just say NO! You don’t have to kickstart the UK economy singlehanded. Stay in, eat in, buy fewer papers and ice creams … but remember to treat yourself every so often.
49. Use debt creatively …All debt ISN’T bad, so borrow cheap to invest for profit.
50. Learn the difference between capital (or principal) sums and interest. It will change the way you view money and it will make you rich if you let it.

… that’s it. I’ll be bringing you another 50 moneysaving tips in a few weeks time.

If you still haven’t explored VOIP phone technology, then you’re missing a trick. VOIP means making free phone calls over the web and it WILL SAVE YOU A FORTUNE. IT can be used PC to PC, PC to phone, or even phone to phone (though the calls are still always via the internet). And it’s easy to set up a VOIP phone system.

The biggest player is Skype. Their software offers free computer to computer calls, and you get massive reductions on calls using your phone too. As someone who makes daily business calls from London to Italy … and pays nothing for the privilege, I can hugely recommend the Skype service.

I’m assuming you’ve got a reasonably new computer and a broadband internet connection. You’ll also need a cheap headset, with earphones and a mic. Then, You simply go to the website of any of the hundreds of VOIP providers and download the software. I won’t go into the technicalities here – we’re interested in saving you money, not grappling with complex new technology, so if it isn’t as easy as peeling an orange I won’t recommend it.

For this reason, I’ve stuck with Skype. A lot of computer geeks don’t favour it, as there are simpler and cleaner packages out there, but it’s easy to set up and lots of people are already using it – so you’re going to find it easy to find other users to make PC to PC phone calls to if you use Skype. You will find a VOIP phone call a slightly different experience. You can occasionally get time lags and ‘drop outs’ of dead air time, as the ‘packets’ of information that are being sent don’t quite deliver properly. Though this improves hugely with the quality and speed of your broadband connection. But the actual quality of sound is extraordinary, like moving from a crackly old vinyl album to CD. You suddenly realise how poor the average landline (and especially mobile) call quality is. Wearing headphones, it does give the slightly creepy sensation of having a conversation with someone inside your bed, but you soon get used to it.

Of course you don’t want to converse just from your computer, or only to people who also have computers running Skype. Luckily VOIP telephony solutions abound nowadays – there are now a host of VOIP providers in the UK. No problem. You can call from PC to phone too, or indeed phone to phone. With more and more phone calls being routed over the internet ANYWAY, this technology is increasingly LESS about new technology and MORE about new and hungry firms smashing the price models of BT and the rest. VOIP phone software is now easy to set up and easy to use – in some cases you don’t even need software. Take a look at one of the biggest providers, jajah, and you see a link for Jajah Direct, phone to phone VOIP.

You simply dial a local number (a London number in my case) and when you reach the automated switchboard you then dial your friend’s number. It’s a slicker version of those phone cards you see on sale in markets all over the world, targeted largely at people ringing home to Africa, the States or wherever. And you can use your regular landline. And that should give you pause for thought when you’re on holiday. Don’t use expensive hotel phones (and certainly not rip off mobiles). If you take your foldaway headset, you can use a VOIP service to make your calls free from the hotel computer.

A service such as Vephone doesn’t even demand that you download any software, as it’s web-based, so everything is happening on the company’s servers. You get a ‘real UK telephone number’ that anyone can call, and all you have to do is log in to an internet enabled computer. Services like this, where you get a proper phone number, could be the answer for those of us who are unwilling to dump the expensive landline and just use a mobile.

Of course, making phone calls from your computer doesn’t have to mean you’re stuck at your desk. Think about it – with the growth of mobile broadband, handsets that surf the web, and the Blackberry of course, we’re increasingly carrying our PC in our pocket anyway. It’s a short hop to turning your mobile phone into a webphone. Mobile is, of course, one area where VOIP has lagged behind, as we tend to buy our mobile with a call-plan attached, whether it be Orange, O2 or whatever. This will, inevitably change. Check out the voipproviderslist website for some interesting stuff on the future of mobile VOIP.

Price comparisons are notoriously tricky. The phone companies change their tariffs even more regularly than the gas and electricity providers, with BT recently slashing the cost of weekend calls to users.
And the VOIP providers too have a bewildering array of tariffs. Some will be free to the USA, some will be cheap for PC to phone, others better for phone to mobile calls, and so on. The best advice is to figure out WHERE most of your calls go (a bit like setting up your BT friends and family list) and then head to voiproviderslist.com, where you can match a service to your needs. One thing is sure – you NEVER need to pay for PC to PC calls, and Skype really comes into its own for my company making conference calls, sometimes between the UK, Italy and the United States. With an attached instant messaging service, you can even type in notes, references, URLs of handy websites etc, during your conversation. It’s a terrific business tool – and it’s FREE.

Of course, VOIP provisioning is quickly going mainstream. In a couple of years time, this will all look different, as we dial VOIP direct from our landlines, and big players like TESCO are already in the market. But for now, take the plunge and get VOIP’d. You’ll save a small fortune.

Links: VOIP providers list, Skype, jajah, Tesco internet phone

Tags: voip phone system, voip telephony solutions, voip

Last week I looked at managed share funds and why they don’t work. Put simply, the ‘experts‘ who dip into and out of the market on your behalf, often aren’t very good at it… and the huge charges they levy on every transaction soon eat up any profits you do make.

So why DO so many financial advisers push managed funds? Well there’s more money in managing investment funds for one thing. Admittedly it’s the fund managers making the real cash, charging you for all those transactions they make, as they pursue their investment in pension funds – usually around 1.5% for a managed fund against upwards of 0.1% for a tracker. And who is buying those shares on your behalf? The problem is that with multi-manager investment funds you don’t really know who’s picking the shares in your fund. But that means their commission on a managed fund is likely to be higher than that on a tracker. Turkeys tend not to vote for Christmas, and somebody selling you a fund isn’t going to vote for tracker funds.

So what do we do? We buy a tracker. You can significantly cut the commissions you pay by buying and holding rather then buying and selling frequently. Put simply, fewer trades, fewer commission payments to your broker.

You also put off paying tax on your profits if you defer selling, allowing more of your money to stay in the market for longer, thereby taking advantage of compound interest. The trackers emerged in the 1990s as many investors began to question the conventional wisdom – that ace investors could beat the market. The new idea was that in the increasingly efficient stock markets of the West, all the information about companies was out in the public domain. It was hard to find bargains … so why bother?

Simply buy the FTSE All Share index, for example. Confident in the knowledge that it would grow 8% or more a year. Buying the index can mean doing exactly that – buying every share in the index, in varying proportions of course. Other funds will be more complex, buying a cross-section of companies that together will still track the index. But however it’s done, there is no dipping into and out of the market depending on good or bad news. Costs are kept low therefore, and no subjective judgements are made.

So do they work? The evidence over the last decade or so is a qualified yes. In ‘bull‘ markets, the tracker will surf the tide of universally rising shares. Bear markets are more of a problem, with trackers following the market down. And when the index has a high proportion of banking shares, as indexes tend to do, then a hit to the banking sector can hit the fund hard.

AND, as you’ll realise, the world banking sector is not in the greatest shape right now. An active manager would argue that he could duck out of banking shares at that point — though as we saw last week, active funds simply don’t have the success rate to back that up. Some experts also claim that trackers increasingly distort the index, as more and more money piles into the big companies, rather than looking for new, growth stocks.

Is that a problem? It CAN exaggerate the scale of crashes when they come, with investor money continuing to pile into stocks that are heading for a fall. A worldwide tracker right now might be giving you more exposure to the arguably overvalued Chinese stockmarket than is sensible … and we DID mention those banking stocks. And if active funds were avoiding those pitfalls, we might agree, but they tend not to.

The irony is, that many of the big financial institutions, who eagerly flog managed funds to the small investor, are actually putting THEIR money into trackers. THEY don’t want to take risks. I’d say the main choice is which tracker you go for. And that, seeing as you AREN’T buying any expertise, WILL BE the cheapest. They start at around 0.1% and that’s how much you should be paying. Of course, unit trust prices and the rest, go down as well as up, regardless of the tracker success story – so you must be prepared for down times.

You’ll find a good selection at Hargreaves Lansdowne, which is one of the UK’s biggest brokers and which also offers reliably good value and service in my experience. Still not convinced? You’re perhaps thinking of ace stock pickers such as Warren Buffet, Benjamin Graham and Britain’s own Jim Slater. I’d also caution that these guys probably had a little more time to study the markets. But if you DO want to go it alone … I’ll be looking at how you can complement your index tracker by selecting your own value shares in another article soon.

Tags: track share funds, managing investment funds, investment funds, trackers, tracker funds, personal financial advice

Most of us who buy shares do so via investment funds – unit trusts, investment trusts and the like. And most of these are ‘managed funds’, where you’re buying a piece of a much larger bundle of shares sold and bought by an expert in the city … a fund manager. The problem is … managed funds just don’t seem to work. The weight of academic work, with studies by economists going back almost fifty years, is that the expert fund managers tend to underperform the market.

In other words you’re paying somebody to do worse than YOU could do yourself, if you stuck pins in a printout of the FTSE 100. We’ll not mention all the surveys here, but you’ll find a link to the various reports down the years at the end of this article. The theory of the expert stock picker, powering a fund that outperforms the market, HAS to rest on markets being imperfect. In other words, there is a disparity between what a stock is priced at and what it is ACTUALLY worth.

So, Ace Oilwells may be priced at £100 a share, but Fund Manager Bob knows that they have new wells coming on stream in Brazil in the coming year, and adjudges the stock undervalued. He piles in (on your behalf) and the shares, and your fund, soars. There’s a problem with this of course. If Bob knows this, then the information is in the public domain. Now it’s arguable that once upon a time even public domain information could travel so slowly that somebody on the ground in Brazil could buy up shares before the news got back to London and the price went up. But THAT ruse went out of the window with electrical telegraphy. And things have moved on a bit since Samuel Morse in 1839. With the free availability of information on the internet and the ever increasing sophistication of stock analysis software, it’s hard to see how anyone today can consistently get an edge. THE ONLY WAY IS IF … the information ISN’T in the public domain, in which case it’s insider trading, and thus illegal.

However you slice it, it’s hard to see how a dealer in London can get an exclusive ‘IN’ to a soon to rise stock. Markets, in the parlance, are already ‘efficient’. Not perfect – there will always be a disparity between the price and the value of a stock, that’s why share prices move. But the chance of your fund manager lucking in to that disparity are, to be generous, small.

Now let’s be fair here. Fund managers DO have good runs. New star managers and funds appear all the time. But here’s where averages bite you (and your investment) in the backside. Take a typical (if very simplified) example. Superfund Emerging Markets was launched three years ago and has outperformed the FTSE 100 for each of those last three years. The odds and the academics say that your fund is only likely to match the market at best … more likely to underperform it. But let’s be generous and say IT WILL match the Footsie. That means it’s likely to UNDERPERFORM the market for the next few, to balance out the good years it’s already had. They might have a better run .. but the principle remains. You’re too late – you’ve bought in just AFTER the fund has had its best years.

Now you see why ‘past performance is no guide to future results’ is more than just a disclaimer. But surely the fact that the funds are underperforming the market over times doesn’t make sense either does it? I’ll leave aside the puzzling fact that these guys with the sharpest brains, the best university degrees and access to ALL the latest data on the markets don’t seem to be able to beat the market. Surely they should at least be MATCHING the performance of the stock market indices? Well the experts are often doing, on a micro scale, just what you’re doing with your fund as a whole. Buying in after a share’s price has already flown.

They are also hopping in and out of the markets, and that in itself is expensive, as there are transaction costs every time you buy or sell a share. And that’s all cash that ISN’T being invested back in buying more stock. Fidelity Investments published some interesting stats a few years ago that showed how dramatically gains in share price were concentrated in just a few days a year. Between 1987 and 2002, looking at the FTSE All Share Index, there was a 9.4% gain, per year, if you bought across the entire index … and left your shares untouched. If you were out of the market for the best ten days of the year, gains fell to 6.3%. If you missed the best 40 days your gains would be just 0.6%. It was a pattern repeated across several of the world indices.

Let’s be fair here, there are two opposing points of view. The fund companies will say ‘We will beat the market’. The people producing these reports say ‘you won’t’. The first guys are trying to sell you a fund, the others are disinterested academics. So who do you believe? We’ll go with the academics.

Links: Underperforming fund managers, Why fund managers don’t make money, www.fidelity.co.uk

Tags: Investment funds explained, Investment funds, investment trusts, managed funds

Online retailers will often ask for a coupon code, discount code or promo code during the checkout process. These promotional codes are usually given away to select potential customers using various campaigns from their marketing departments and offer money-off discounts or free shipping. Some thoughtful internet users will often share these discount codes online so that others can enjoy money off too.

Next time you purchase something online and are filling in your address details in the checkout we recommend opening a new window and using Google to search for these secret promotional codes online. Each promo code will knock money or a certain percentage off, give you free shipping, send you a rebate, throw in a free gift or even offer free delivery on heavy items. When dealing with expensive items a quick 2 minute search for promotional codes can literally save you hundreds of pounds.

Here are some quick tips when searching for discount and promotional codes:

• Keep it simple. Use the company name or URL, followed by “coupon code“, “discount code” or “promotional code“.
  Try “spalook promotional code” (AMOM gets you 20 FREE Samples Plus Gift Card)
• Check the expiry. Use a date when searching too. Most coupon codes have an expiry date so try adding a month and year onto the end of your search otherwise you’ll be constantly entering expired codes at the checkout.
  Try “godaddy coupon codes may 2008” (WALLET1 gets you 10% off your GoDaddy)
• Free shipping. Some sites won’t offer you a discount but might offer free shipping. Take advantage of adding “free shipping” or “free delivery” to your search for products where shipping costs might outweigh the cost of the product.
  Try “jcpenney free shipping” (JCPCAPRL), “free shipping wooden bathroom vanities” or “leather sofa free delivery removal”
  These could save your a fortune when buying large, heavy and cumbersome furniture online.
• Scour the forums. Forums are often a great place to find discount codes as they offer a quick and easy way for their users to post and share their codes. If you are struggling to find codes from the hundreds of official promo code sites out there then just try adding the word “forum” to the end of your search
  Try “jo ann free coupon codes forums” (APRA840) or “free subway coupon forum”
  Not only will you find a suitable code for your product but you may also stumble across some like-minded shoppers who have brought the product or brand and know if its worthwhile buying it or not.
• Look for campaigns. Try searching for a specific campaign relating to the company.
  Try “netflix 30 day coupon“
• Printable coupons. For items which don’t have online retailers look for printable coupons instead so alter your search accordingly.
  Try “free printable coupons for subway“
• Look after the pennies. This doesn’t just apply to expensive goods ordered online. From fast food to pizzas – cheaper everyday products also have promo codes too.
  Try “subway sandwich coupons“, “outback steakhouse coupons“, “wendy’s coupons” or “papa john coupon codes”
  These could see you snacking out for free. Just find the code, print it out and bring it along to the shop or restaurant.
• Stay local. Check which country these coupon codes are valid for, remember the internet is global. Adding “£” or “$” to your search will filter out foreign offers not applicable to you.

To help you save money on a wide range of goods and services we’ll be hunting down and listing some codes ranging from coupons for self gifts to airline promotional codes, from discount hotel coupons to free pizza coupons and publishing them here on Wallet Watcher. You can view the growing list on our Wallet Watcher secret promotional codes list which we’ll be updating on a regular basis. If you would like to get these offers automatically via RSS then subscribe to our Wallet Watcher RSS feed, where you’ll get regular money saving advice and tips as well as our weekly Wallet Watcher podcast (also available from our Wallet Watcher page in iTunes for free).

Tags: coupon code, discount code, promo code

Hardly anyone has a good word to say about the ever-rising Council Tax, yet we all grumble and pay up. Yet, while you can’t do much about the rates of Council Tax, you may be able to get your property switched into a cheaper band. And Council Tax rebanding means you can enjoy savings of hundreds, even THOUSANDS of pounds.

The reason is that Council Tax is a bit of a mess to start with. Think back to the early nineties, the Poll Tax riots and the desperately hasty launch of the replacement system … Council TAX.

All houses in England, Wales and Scotland were swiftly banded, from A to H, depending on the value of the property. It doesn’t take a genius to work out that with millions of homes rated over a period of months, some of the estimates were arbitrary and plain wrong.

There are many thousands of people in this country in higher bands than their neighbours … though in identical houses, often right next door.

And as nobody’s making much of a fuss, nobody in officialdom in England is DOING anything about changing it. Back in 1995 Welsh properties were rebanded, though Welsh property owners should still check.

And it’s very easy, with websites to help you do it. In England and Wales you should go to the Valuation Office Agency or VOA. In Scotland visit the Scottish Assessors Association (SAA).

Go to the website and tap in your postcode and you’ll be told your council tax band. Then do the same for a neighbours’ house. It HAS to be comparable to yours in size, bedrooms and so forth, so, if you live in a semi, start right next door.

Then radiate out, finding similar properties in the area until you have a few that are rated lower than yours. Okay, you now have your first piece of evidence.

Your second is to find if your property was actually valued wrongly in the first place. Properties under £40,000 (yes there were such things back then) were placed in Band A.

Band B covered £40,000 to £52,000. Band C from £52,001 to £68,000. Band D from £68,001 to £88,000. Band E from £88,001 to £120,000. Band F from £12,001 to £160,000. Band G from £160,001 to £320,000. And Band H for homes of £320,001.

A salutary lesson in how prices have SOARED over the last 17 years.

Take the current value of your house and feed it into the Nationwide House Price Calculator, which will give you an estimate of its approximate value in 1991. Then compare that price to those bands we’ve given you above – this will help you in your case of getting Council Tax rebanding.

Now a word of warning here. Speculative punts are NOT a good idea. I punched in my postcode and worked back from the price I paid for my house in 2001 to the estimated value in 1991.

According to that data, my house is actually in a LOWER band than it should be. Now these figures are a blunt tool. In fact, it’s MORE likely that house prices where I live in London have simply gone up higher than the average.

But be warned … a speculative assessment could actually see you getting PUSHED up a band. Unlikely, but possible. Also be aware that the ‘reverse valuation’ we did there has no legal basis, as it is simply a guesstimate … but it’s all useful information in your quest to reclaim your cash.

Let’s say you DO think you have a good case. If you’ve been in the house six months or less, then appeal directly to your local authority (the council in other words).

If it’s longer than that, then you have to go to the VOA (in England and Wales) or the SAA in Scotland. You can appeal online … it’s quick and it’s easy.

And the potential gains can be huge. Remember, in England and Scotland the bands haven’t changed since 1991. So if there is a rebate to be paid, it could potentially be thousands … all the way back to 1991.

And even if you can’t get Council Tax rebanding changed, check you’re getting any council tax rebates you’re entitled too.

If you earn under £16,000 a year (or £9600 if you don’t have kids), if you live alone, if you’re in full time study, if the property is empty, if you are disabled or a carer … you are liable to at least a discount or possibly exemption. Contact your local authority to find out where you stand.

Links: Council tax banding England and Wales, Council tax banding Scotland, How the Council tax bands were set in 1991, Nationwide House Price Calculator

Tags: Council Tax rebanding, Council Tax rebanding article, council tax reclaiming, standing order