Investment Insights - Hot Topics April
Welcome to Balance: Wealth Planning's Hot Topics!
Balance: Wealth Planning's April edition of Hot Topics.
Every month, our financial planners will collate the latest 'Hot Topics' within the industry, which we will share with you. The purpose is to update you regularly as these topics are happening and help cover any frequently asked questions.
So, without further ado, please enjoy this edition of Hot Topics!
Spring Budget in Brief
In March, Jeremy Hunt announced as part of his Spring Budget, that there would be a new British ISA introduced to sit alongside the existing 4 other ISAs available in the UK (cash ISA, Stocks & Shares ISA, Innovative Finance ISA and Lifetime ISA). The unique attribute to this ISA is that it can add an additional £5,000 on top of your £20,000 annual allowance limit, however, this will solely be investing in UK companies.
While there are still many details yet to be concluded as to what the British ISA will look like (the consultation period will run up until 6th June 2024), this type of tax wrapper can help in an individual's goals of wealth creation.
If we assume that by investing in British Companies, the government are implying that within the British ISA you could only invest in UK companies which were listed on the FTSE All Share. This means that once you have maximised your ISA allowance of £20,000, you have a choice, either invest £5,000 into a British ISA and benefit from tax-free growth or invest £5,000 into a global diversified portfolio with growth being potential subject to capital gains.
If we observe the last 5-years for returns, we can see investing in the FTSE All Share would have turned £5,000 into £6,369.31, a return of £1,369.31. Whereas, investing the MSCI World (represented by Fidelity Index World) would have turned £5,000 into £9094.88, a gain of £4,094.88. This would be £3,985.40 after Capital Gains Tax (assuming you’re a basic rate taxpayer).
We’ll have to wait and see what the British ISA will look like after the consultation period. However, it looks like continuing to invest in a globally diversified portfolio will still overcome the tax benefits of a British ISA. As they say, ‘don’t let the tax tail wag the investment dog’.
Best performing stocks
FE fundinfo 2024
If someone had asked you what the best performing stock had been over the last 30 years, what would you guess it was? Microsoft? Amazon? Apple? No, in fact it wasn’t any of the tech giants. CNBC revealed in February that it was the drinks company, Monster Beverage. For the last 31 years Monster Beverage has consistently grown it’s sales year on year and has had a strategic partnership with Coca-Cola since 2015.
This is a fascinating statistic. Of course, the majority of the top-10 best performing stocks are the major tech companies, but how was an energy drinks company capable of producing the strongest returns for shareholders over this period.
Some of it was down to right place right time of course, but the overarching story behind Monsters Beverage’s growth has been their ability to grow the brand and understanding their customer. Monster sells their main product for the same price as Red Bull (main competitor) but for twice the volume. They don’t conduct any of the typical marketing methods, instead they ‘sponsor’ athletes from extreme and unconventional sports, further strengthening their core consumer base. This has allowed the company to grow their brand and cement themselves as a core business within the drinks market.
What can we take from this?
So, what can we take away from the growth of Monster Beverage? In a world obsessed with tech and innovation and with AI ready to take over every business model on the planet, it’s refreshing to see that finding good companies with a solid business model can reward shareholders handsomely over the years ahead, a core function of what the stock market is designed to do. Perhaps trying to find the next ‘Amazon of AI’ may not be necessary when seeking out strong investment returns over the years ahead.
Please note: This update is not financial advice and is provided for information only. You should not take any action before speaking to a Financial Planner, who will confirm what suits you.
Please feel free to share it with anyone who may be interested. If you have any questions, please get in touch with your usual contact or investments@balancewealth.uk.