Teachable moments, offshore bonds & Swiss Banks

I caught up with a very successful friend of mine this week.  She sold a big chunk in her business a year ago, clearing >£10m of cash.  She has been meaning to decide what to do with the funds but has been too busy / fearful / etc to decide.  So the money has been sitting in cash in her bank account.  But she told me today that she’d decided to go with a Swiss Bank and use them to open an offshore bond, putting £5m into it.

I sighed, rolled my eyes, and generally acted in a not-very-empathetic manner.  Then I asked her to consider taking £1m of her £5m, doing a simple Do-It-Yourself approach instead, and comparing the difference over a few years.  She asked me to drop her an email with some details.  So today I sent her an email, which I reproduce below. Please note that this is not financial advice, just encouragement.

Any comments/improvements would be very welcome. For reference, Jane lives and works in the UK, has several kids, and has a husband who works in the public sector. Jane has a net worth of at least £20m.

To: Jane

From: FvL

As promised here is what I would encourage (note – not advise) you to consider as you deploy your funds.

Continue reading “Teachable moments, offshore bonds & Swiss Banks”

Feb ’17 returns: Kraft + Unilever? !$£€

Another month, another stream of Trump headlines.  You have to hand it to him, he certainly knows how to drive the ‘ratings’.

However for me the biggest news of the month was Kraft/3G’s aborted bid for Unilever. Unilever is one of the biggest companies in Europe/UK.  Its share price has done pretty well of late, courtesy of the ‘flight to safety’ and the ‘bond proxy’ trends towards the reliable defensive inflation-proof stocks that it represents. But the fact that Kraft, a company with less than half its revenues, can table a bid for it including a takeover premium suggests there is obviously significant room for further value creation. I’ve got a reasonable position – of a ‘buy and hold’ type – so I’m paying attention.

Meanwhile, how have the markets and my portfolio done this month?  Continue reading “Feb ’17 returns: Kraft + Unilever? !$£€”

Capital gains vs income, and living within your means

Something’s been on my mind quite a bit recently, and I realise I don’t read much about it. At it’s simplest, it’s how to think about my portfolio’s income versus capital gains.

What I think I know about Capital gains vs Income

I have always liked Income.  I see it as something which is hard to fake; it is closely related to a company’s cashflow, not some mumbo jump Snapchat-like handwavey numbers.  If a company increases its dividend from 50p/share to 55p/share that tells me quite a bit about its profitability and prospects; if a company share price rises from £10 to £11 that tells me next-to-nothing about the company’s performance or prospects.

Continue reading “Capital gains vs income, and living within your means”