Real Estate Still UK's Largest Investment Asset Class

As a result of budgetary changes in March 2014, more pensioners are investing in residential property as part of their pension pot than ever before.
Drawn to the asset by the fact that real estate has shown to be the best performing asset over the past 30 years, pensioners are exercising their freedom to choose investments that will generate the healthiest income in later retirement.
With life expectancy in the UK at an all-time high and rising annually, pension pots have been running out prematurely and not providing the income expected which has made retirement financially difficult for some.

Real Estate Out-Performs Other Asset Classes Year-on-Year

However, since the changes increasing numbers of savers have been seeking alternative forms of investment to fund their retirement. Property investment has provided many retirees with a secure source of regular income and has removed the risk of funds running out during retirement.
Residential property has proven to be an asset that out-performs every other asset class consistently year-on-year. Property also grows in value over time and as such, makes the perfect investment to hold on to for as long as possible. An asset like residential property will provide a much stronger, more secure income over the course of retirement.
British pensioners have also been increasingly turning towards equity release which allows them to raise funds on their property without moving home, freeing up capital to re-invest in residential property and increase their income during retirement.

Property Prices Driven by Owner-Occupier Market

A key attraction of residential property to long-term investors is that the income stream from housing is linked to wage growth and can offer investors an even better hedge to their liabilities than commercial property which is more closely linked to the slower growing retail price growth (RPI) and other property market indicators.
There are also more bargains to be had with residential investments as they are generally sold at a discount to vacant possession value. This represents the amount that would be achieved if the property were sold vacant on the open market to an owner-occupier.
In other words, residential property prices are driven by the owner-occupier market and do not correlate to demand from residential property investors. If at the point of purchase the property is let on an assured short-hold tenancy, the value of the asset will be discounted.

More Value for Money with Residential Property Investment

Reduced affordability in the UK has also impacted the residential property investment sector as increasing numbers of pensioners purchase properties specifically to rent out to their offspring or assist in the purchase of their first home to get them on the property ladder.
Although there has been widespread criticism, it is much easier to raise mortgage finance on a property that is not going to be owner-occupied. Loan to Value (LTV) is also at a higher level for buy-to-let mortgages with lower deposits payable.
This makes the market a very cost-effective way of providing homes to younger family members while generating an income and increasing capital values for an existing pension pot.

Source: http://www.ipinglobal.com/ipin-live/407289/real-estate-still-uks-largest-investment-asset-class

Even the Wealthy are Broke

Upper-middle income Americans aren’t saving much money says a report from the Federal Reserve. Only 45% of upper-middle-income Americans reported saving any money in 2012. This doesn’t come as such a surprise to anyone paying attention to the personal savings rate in America. The rate, while somewhat improved since 2005, is below its historical mean by 3.1 percentage points at only 5.3%.



 

Another sad statistic from the Fed report shows that 68.6% of Americans feel as though their financial well-being is about the same, worse, or much worse than in 2008. For those with cloudy memories, 2008 was the year the economy went belly-up. Again, for anyone paying attention to consumer sentiment, this isn’t so surprising. While sentiment has improved greatly from the days of deep recession, a quick look at the University of Michigan consumer sentiment survey shows readings still below historical mean. That’s not the picture of a strong recovery.

 Source: http://www.youngresearch.com/researchandanalysis/personal-finance/even-wealthy-broke

App apathy

Earlier this week we wrote about the state of the app economy and the idea of how bundling and unbundling help define how software has progressed over time. Not only on the smartphone but on the PC before. Some additional data help demonstrate how the app economy has become somewhat satiated, or some might say stagnant over time.
Dan Frommer at Quartz citing a comScore report notes that nearly two-thirds of smartphone users don’t download any new applications in a month.

There are a number of explanations for this but it may simply be the case that most users have their needs met by the most used apps. Frommer writes:

"One possible explanation is that people just don’t need that many apps, and the apps people already have are more than suitable for most functions. Almost all smartphone owners use apps, and a “staggering 42% of all app time spent on smartphones occurs on the individual’s single most used app,” comScore reports. New apps come and go, especially games, but perhaps breakthrough apps will be increasingly rare. A look at the top 25 most-used apps reflects mostly mature companies, including Facebook, Google, Pandora, and Yahoo."

Facebook ($FB) has taken the approach to be a “mobile conglomerate” buying insurgent apps that might threaten their core services. Rather than integrating them Facebook has kept Instagram and WhatsApp separate for now. Google ($GOOG) has six different apps that show up on the list of the top 25 most-used apps. Yahoo ($YHOO) has three.
What we are seeing is “stealth bundling.” Companies buying services for strategic and competitive reasons but choosing not to explicitly bundle them together like happens in other markets. A company like Uber is taking a different tack opening up its API to third parties in order to increase its reach. Whether it is explicit or by stealth companies might take they are trying to increase their share of your mobile spending. So for now, bundling is on the rise.

Source: http://abnormalreturns.com/app-apathy

Americans confident about investing

How can you know what you don't know? That is the problem at the heart of getting people professional help with investing. Well, it's one of them anyway.

A Harris Poll released earlier this month found that three-quarters of the population say they are concerned about having enough money to retire, but less than half of the poll respondents say they need guidance on investing their savings.

Evidence points to the possibility that maybe people need a little bit more help than they think. This year's Quantitative Analysis of Investor Behavior from DALBAR, a financial services market research firm, showed, again, that investors tend to be their own worst enemies.

The average stock investor got a return of 25.54 percent in 2013 compared to 32.41 percent for the Standard and Poor's 500 benchmark index. In a year where it was hard to pick the wrong stocks, people probably took on more risk than was necessary, according to DALBAR's analysis.

But, the rubber meets the road when the market declines. That's when the most egregious investor mistakes are made, DALBAR reports. Not coincidentally, that is when investment advisers earn their keep as they advise clients to stay the course and talk them out of rashly selling investments when the market is down.

Source: http://www.bankrate.com/financing/investing/americans-confident-about-investing

The Best Way to Tell If You're a Successful Entrepreneur

I'm not a very successful entrepreneur.  Are you?
You may think so because your business is doing well financially.  Or you've managed to stick a lot of money in the bank.  Or you're on the cover of Inc. Magazine.  But these are not the true indicators of success.  The most successful entrepreneurs I know are the ones that are building value and creating assets.  And do you know how they do that?  They take vacations. Yes...vacations! And for a long time too.  Whenever they want.  Unfortunately, I'm unable to do this.  Which is why I'm not truly successful.  And, apparently, I'm not alone.
According to data released today from Office Depot, a whopping one-third of small business owners in the U.S. are unable to break away for vacation this summer.  60% of them cited financial hardship as the reason.  The rest had excuses ranging from "it's my busy season" to "I don't have enough staff."  These are not successful business owners either.
Sure, I take vacation.  But it has to be planned well in advance.  I can never take more than a week at a time. I have to be somewhere accessible.  During my vacation I'm always checking in with the office.  I'm answering questions when away.  I'm sending emails, taking a few calls, talking to my staff. I'm that guy who's watching "Old Faithful" while responding to text messages at the same time or talking on the phone while his family is going on that Disney ride without him.  This is not success.  This is the madness of keeping a business running while I'm trying to spend time with my family.  I'm earning a living. But I'm not creating value.  A valuable company is the true sign of an entrepreneur's success.
A valuable company doesn't just have a strong balance sheet.  Or strong earnings. Or a healthy cash flow. Those are all good things.  But a truly valuable company has intangible value.  It can run on its own.  There is infrastructure.  There is organization.  There is a chain of command.  It's a ship that will keep sailing on course regardless if the captain is there for a reasonable period of time.  It has processes and procedures and protocols.  There are set ways of doing things, documentation, manuals and rules.  A McDonald's franchise is valuable because everything is so regimented that the owner can slot in a different manager every week who can then run with the ball after just a little training.  This is not my business.
If a potential buyer were to look at my business he'd find a ten person company that's completely reliant on me.  I sign all the checks.  I make all the deals.  I approve all the transactions.  I hire all the workers.  I make all the decisions.  I have the primary relationship with our clients. I micro-manage every project.  A buyer would need to keep me on as an employee or consultant to keep the business going so that it can gradually, someday be transitioned over to a company that can run without me.  If I were hit by a bus then my company would ultimately fold in on itself after just a few short weeks.  This is not success.  This is not value.  This is just a glorified job. I haven't been creating an asset.  I've just created work for myself and nine others.
Is it a good time to sell your business?  Definitely, absolutely, yes.  According to a BizBuySell.com report issued this week, second quarter small business transactions reached their pre-recession activity, up 11% over Q2 2013 and transactions were just 3% short of the record mark set in Q2 2008.  The 2,029 reported transactions in Q2 2014 represented the second highest total recorded since BizBuySell.com began tracking insights data in 2007.
Why all the activity? Interest rates are low so getting financing is attractive.  Inflation is low which means alternative investments are fewer.  Capital gains taxes are still at a relatively low level while the general population of business owners are getting older and looking to retire, which creates more supply of available companies.  "If you're an experienced entrepreneur then now's a great time to buy a company," Curtis Kroeker, President of Marketplace Verticals at BizBuySell, told me recently.
Unfortunately, if you're like me, your selling price may not be as high as you hoped.  And that's because your business can't run on its own, even when you're on vacation.  A buyer will need to buy you along with the business.  And that really impacts your company's value.  And your value too.  So maybe you think you're a successful entrepreneur.  But if your situation is like mine then really...you're not.

Source: http://www.inc.com/gene-marks/the-one-way-to-tell-if-you-re-a-successful-entrepreneur.html

2014 already shaping up to be successful for small businesses

Small businesses have been a growing force among the industry in recent years, and the latest reports only strengthen that statistic. A study from Manta, an online community for small business owners, looked into not just how these startup owners and entrepreneurs are faring in the current economy, but how they personally are taking to their ventures. The majority of the responses were positive, and one interesting finding of the study has to do with an up-and-coming demographic. The millennial generation is blossoming in the small business market, and the survey found both men and women business owners in this age group are seeing more success than the rest of their peers.

“Though a challenging undertaking, there are invaluable rewards that come with being an entrepreneur,” said Manta’s CEO, John Swanciger. “Millennials are also demonstrating they’re a new driving force behind the small business community. It’s no longer assumed that recent graduates will enter the traditional workforce. Companies will have to adjust as millennials become a bigger force in the small business space.”

Confidence abounds among small business owners

Manta surveyed 1,105 small business community members regarding their success so far in 2014 and predictions for the rest of the year. Confidence about the way things has been going was high for 68 percent of respondents, which is a 12 percent increase compared to last year’s sentiments. Overall, 83 percent indicated they believed the rest of 2014 would be more successful than the first six months for their companies.

Millennials make a big splash

People born between the early 1980s and the early 2000s, grouped together in the millennial generation, may be more successful than their older counterparts when it comes to running a thriving business. Approximately 76 percent of these individuals said the first half of the year smiled on their businesses, and a whopping 90 percent are confident the second half of the year will only get better.

Hiring has gone up and will continue to do so

Small business owners across the board are also making moves in terms of hiring more employees. Overall, 30 percent hired new staff members between January and June, a 10 percent rise over the previous year, while 35 percent are planning to do so before 2015. Among millennials, however, these numbers are much higher, confirming the group’s increasingly imposing presence in the industry. Nearly half, 44 percent, brought on new employees in the first half of the year, and 52 percent indicated they wanted to hire more people by year’s end.

Consumers backing small businesses too

Not only are entrepreneurs confident about the state of their businesses, but the general public is putting a lot of faith into them as well. A recent Gallup poll revealed that 62 percent of Americans have either “a great deal” or “quite a lot” of confidence in smaller companies, whereas only 21 percent felt the same about big enterprises. This could indicate a shift in consumer shopping trends toward small business that may prove company owners right in their predictions for the rest of the year. This can put strain on small business funding, so outsourcing certain departments such as payroll for small business may be wise to compensate for the expense of new hires.

Technology is an important driver for independence

To run a successful business, no matter what the company does, sells or provides its customers, technology is an integral aspect of success. This much may be well-known, but the Manta survey set out to determine which factors were most valuable to small businesses. Internet connectivity ranked as the No. 1 feature, with 39 percent of respondents backing this service. Mobile phones came in at a close second at 32 percent. Only 18 percent felt email was the top technology to have, and 3 percent cast their votes for organizational applications.

Source: http://buildmybiz.com/2014-already-shaping-successful-small-businesses