2011 has certainly been a year of strong themes which have dramatically shaped the market as well as the opportunities available for savers and investors. We take a look at what these have been and how this will shape Fair Investment’s focus in 2012.

The landscape is all too familiar

The reality for all savers and investors is that 2011 has been one of the most challenging years on record. The compound effect of investment returns, inflation and interest rates has created an environment which poses more serious questions than it answers.

The FTSE 100 finished the year down 5.6%, inflation as measured by the Retail Price Index remained above 5% throughout the year and interest rates remained unchanged at their record low of 0.5%. These figures alone are enough to drive the most disciplined savers and investors to despair.

No place to hide

The combined effect had an impact on every person in the UK and worryingly the reasons underlying these tumultuous times are not looking to change any time soon.

For savers relying on fixed rate bonds to supplement their income or achieve capital growth in real terms, rates have been seriously affected and there is nothing coming from the Bank of England which suggests there is any let up on the horizon. For investors, markets have made it difficult to break even which only goes to compound the effects of high inflation and poor yields by putting greater stress on the capital value of investments.

The market reacts

One of the main positive themes which we see continuing is the rise in popularity of alternatives to fixed rate bonds. Structured deposits combine the potential to receive much higher returns than are available from fixed rate bonds but also offer full capital protection. With the all too familiar economic backdrop it is easy to see why savers and investors alike are rightly looking to alternatives in an attempt to boost their returns.

Another positive theme is a significant increase in the use of the Kick Out plan by investors. These plans have the ability to mature early providing high levels of returns (up to 13.5%) even if the FTSE has only gone up by a very small amount, and overall they offer a competitive balance of risk v reward, especially when compared with funds or directly held shares.

Fair Investment to the rescue

The main themes which affect savers and investors are constantly at the forefront of our research and discussions with banks, investment banks and investment houses. By understanding the challenges created by the economic landscape, we are able to feedback and where necessary put pressure on the market to produce those plans which meet the needs of clients.

At Fair Investment we are constantly reviewing all of the options available and aim to keep you right up to date with the best that the market has to offer and, where possible, to fill the gaps where a plan either does not exist or simply does not meet the required standard.

Main themes continue

Inflation continues to be a major focus and we are currently working on trying to offer the most attractive plan possible to cater for those looking to counter the effects of high inflation, particularly over the medium to long term. In the savings space we are always looking to secure market leading fixed rates right across all terms from one to five years.

Finally, with investments we continue to put pressure on all providers to show innovation around making investments transparent, as well as providing a competitive balance of risk v reward. We are looking to compliment what is already a wide range of options with easy to understand and yet competitive plans which combine putting your capital at risk with the potential for highly attractive income and growth returns.

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Some structured investment plans are not capital protected and there may be the risk of losing some or all of your initial investment. There is also a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated, in which case you may not be entitled to compensation from the Financial Services Compensation Scheme (FSCS). In addition, you may not get back the full amount invested if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

© Fair Investment Company Limited