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Stock market crash: 5 danger signs from early 2022!

on February 11, 2022

History has taught me that sky-high prices produce fragile markets. Hence, as asset prices soared to new heights in 2021, I grew increasingly concerned about the risk of a stock market crash. When share prices fall 20%+ from their previous high, this is a crash (also known as a bear market). When post-peak stock prices fall by 10%-20%, this is a ‘correction’. Here are five early-warning signs from 2022 that make me nervous about further price falls.

1. The S&P 500 dived in January

The S&P 500 — the main US stock market index — dipped into correction territory last month. On 4 January, the index hit an all-time high of 4818.62 points. By 24 January, it had slumped as low as 4,222.62, down 12.4% and into correction territory. Following its worst January since 2009, the S&P 500 currently stands at 4,504.08, down 6.5% from its peak. For a full-blown stock market crash, the index would have to fall below 3854.90 points. That’s under 650 points (-14.4%) from here.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

2. The Nasdaq nearly had a stock market crash

The tech-dominated Nasdaq Composite index performed even worse than the S&P 500. On 22 November 2021, the Nasdaq hit a record high of 16,212.23 points. Two months later, it collapsed as low as 13,094.65 on 24 January. That’s a slump of 19.2% — within a mere whisker (125 points) of a full-blown stock market crash for the Nasdaq. As I write, the index stands at 14,185.64, down an eighth (-12.5%) from its November 2021 peak. Thus, it’s not difficult to imagine the Nasdaq entering a bear market at some point in 2022.

3. Stock market crash: volatility has soared

In 2020-21, governments and central banks pumped a tsunami of liquidity into financial markets. And high liquidity usually leads to low volatility. However, with this liquidity being withdrawn over 2022, volatility has spiked recently. This pattern is often seen at the start of stock market crashes. For example, in 28 trading days so far in 2022, high-low daily volatility for the S&P 500 has been below 1% on only five days. On 11 days, it’s been over 2% and it peaked at 4.6% on 24 January. Likewise, the CBOE Volatility Index (also know as the VIX volatility index) currently stands at 24.22 and hit its 2021-22 peak of 38.94 on 24 January. A normal range for the VIX is around 13 to 19, so it’s been highly elevated in 2022.

4. US bid-offer spreads are rising

The bid-offer spread is the difference between the buying and selling prices of a particular stock. For example, market makers may offer a bid-offer spread of $200.20 to buy and $200 to sell. When market confidence, volumes, and liquidity are all high, trading is brisk and bid-offer spreads get pushed lower. However, since the end of 2021, gaps between buying and selling prices have been rising. For some volatile US stocks, spreads have doubled and more. Also, analysts warn that recent intra-day liquidity was at its lowest level since March 2020’s market meltdown. Again, this lack of market depth and liquidity is commonly seen at the start of (and during) stock market crashes.

5. A huge red flag from bond markets

Finally, the income yield on the benchmark 10-year US Treasury (government bond) has soared recently, due to red-hot US inflation. It currently stands at around 2.01% a year, almost double its 52-week low of 1.13%. With ultra-safe bond yields leaping, this suggests drooping confidence in risky assets.

As for me, I’m avoiding highly priced US stocks for now. Instead, my family portfolio continues to buy cheap UK shares offering high earnings yields and juicy dividends!

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

The UK’s most popular used cars revealed

on February 11, 2022

The UK’s most popular used cars revealed
Image source: Getty Images

The used car market has witnessed a significant uptick in demand over the past year.

This increased demand has been caused by a global chip shortage, which has crippled car production lines and resulted in customers experiencing lengthy delays in receiving the new vehicles they ordered. As a result, many of those looking to buy a car have turned to the second-hand market.

In this article, I’ll tell you the used car models that Brits have been buying the most and also give you some tips on how to save money when buying a used car.

What has happened to the used car market in the past year?

According to new figures from the Society of Motor Manufacturers and Traders (SMMT), used car sales increased 11.5% in 2021 as a global chip shortage affected new car sales.

The data shows that a total of 7,530,956 used cars were sold in the UK last year, up from 6,752,959 in 2020. Despite this growth, the sales figures for 2021 are still 5.5% below the pre-pandemic five-year average.

Other key statistics from the used card market worth mentioning are:

  • Sales of used petrol and diesel cars rose by 10.7% and 9.8% respectively last year.
  • Demand for used battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) hit new record levels, rising by 119.2% and 75.6%, respectively.
  • Hybrid electric vehicle (HEV) sales increased by 50.3%.

What are the most popular used cars?

The data shows that the Ford Fiesta is the top dog. It was the best-selling used car in the UK in 2021, with a total of 326,346 transactions. It was followed by the Vauxhall Corsa with 262,488 transactions and the Ford Focus with 251,265 transactions.

Here’s the complete list of the top 10 most-sold used cars in 2021.

Rank

Model

Number of sales

1

Ford Fiesta

326,436

2

Vauxhall Corsa

262,448

3

Ford Focus

251,265

4

Volkswagen Golf

247,919

5

Vauxhall Astra

200,911

6

BMW 3 Series

175,190

7

MINI

167,828

8

Volkswagen Polo

147,372

9

Audi A3

122,856

10

BMW 1 Series

122,840

How can you save when buying a used car?

Not surprisingly, the surge in demand for used cars has resulted in a sharp spike in used car prices.

Figures from Auto Trader show that used car prices rose by almost a third (30.5%) in December 2021 on a year-on-year and like-for-like basis.

So, if you are in the market for a used car, how can you save money on your purchase? Here are a few helpful tips.

1. Do your homework

Go to the dealership or meeting with the seller armed with as much information as possible about the vehicle you’re interested in. That means doing your homework beforehand on things like the car’s features, reliability and pricing.

Being knowledgeable about all of these things can help you stay in control during negotiations and recognise when you’ve got a good deal.

2. Set a budget and stick to it

Having a specific maximum figure in mind can help ensure that you don’t overspend on the car.

However, you don’t need to mention your maximum budget to the dealer or seller, as it could actually put you at a disadvantage. For example, if the listed price is close to the highest amount you’re willing to spend, it may be harder to negotiate a lower price since the dealer or seller already knows you can afford more.

3. Skip the popular car models 

The more popular a model is, the higher the likelihood that you will have to pay a premium for it. Going for less popular models could end up saving you money.

4. Opt for discontinued models

Occasionally, carmakers will discontinue the production of a particular model for a wide variety of reasons. That doesn’t mean that these models aren’t worth considering when shopping for a used car.

If you are not fussed about a particular model not being in production anymore, opting for one could actually save you a significant amount of cash. It’s not uncommon for dealers to price down these models in order to get them off their forecourts faster and make room for newer models.

But what about parts?

Well, the good news is that most manufacturers will continue creating parts for particular models for years after they go out of production. Third parties will routinely make car parts too. In a nutshell, parts should not be a major issue of concern.

Final word

When purchasing a new car, don’t forget to consider the total costs of ownership. For example, before you buy, try to get an insurance quote first. Otherwise, you risk purchasing a car model that is far out of your price range.

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About the author

Avatar for Sean LaPointe

Sean LaPointe

Sean is a personal finance writer with a strong passion for helping others become more financially literate and make better financial decisions. He covers everything from credit cards to savings to investing.

Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

The UK economy is back! Here are 3 FTSE 100 stocks to buy now

on February 11, 2022

Numbers for the UK economy released earlier today continue to look good. For the full-year 2021, the economy saw 7.5% growth from last year as recovery from the pandemic ensued. In the final quarter alone, the gross domestic product (GDP), which is the headline measure for economic activity, rose by 1% from the quarter before. This is despite disruption caused by the Omicron variant. In my opinion, this bodes particularly well for some FTSE 100 stocks.

Not all FTSE 100 stocks would gain equally

Why only some? Well, there is no denying that a buoyant economy is likely to be good for stock markets in general. This in turn, could lift all stocks. However, the FTSE 100 index is made up of big multi-nationals. Some of these do not have significant interests in the UK economy. Consider the industrial equipment rental provider Ashtead, for instance, which garners no less than 80% of its revenues from the US market. Or consider international big mining stocks, many of which are part of the FTSE 100 index. These include the likes of Switzerland-headquartered Glencore and Russian Evraz, which also get much of their revenues from around the world. They might do well, but not because of the UK economy in particular.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Tesco could continue to perform

However, there are some FTSE 100 stocks that are focused on the UK markets. One fine example is Tesco, which has the biggest share of the country’s grocery market at 28%. Much of the company’s revenues come from the UK and Ireland. And it has also performed very well in the past year. It also ticks other boxes. Its share price has performed quite well in the past year, it is still reasonably priced going by its price-to-earnings (P/E) ratio of sub-20 times, and it even pays a dividend. 

Its present yield is 3.1%, though, which is below both the FTSE 100 average of 3.4% and the inflation rate at 5%. It might not see the same growth in grocery purchases post-pandemic as well. But broadly, I reckon I would come out ahead for buying Tesco’s shares over time. It is on my investing buy-list. 

Lloyds Bank is on a roll

I also like Lloyds Bank, which, unlike most other banking stocks is driven by the UK markets. The stock has pretty much sustained 50p+ levels through 2022 so far, and its prospects look good too. Rising inflation might be a real downer for many other FTSE 100 stocks, but for Lloyds Bank it is something of a blessing. Interest rates are expected to rise fast and that could improve banks’ margins. I also anticipate that its sagging dividend yield will improve this year, as the economy expands further. It is currently at 2.3%. 

Of course if inflation runs too high or yet another variant of coronavirus throws a spanner in the works, the economy could be in doldrums again. And the stock is very likely to dip back to sub-50p levels too. But for now, I think it is a good bet. It is also on my buy-list for 2022. 

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  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’d follow Warren Buffett’s advice to buy the best UK shares

on February 11, 2022

Warren Buffett is best known for investing in US stocks like Coca-Cola and Apple. But a lot of the legendary investor’s advice focusses on how to find undervalued shares. That applies to UK shares too, not just American ones.

Here are three ways I would follow Buffett’s advice when hunting for the best UK shares to add to my portfolio now.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

1. Look for a moat

Buffett focusses on companies that have a sustainable competitive advantage. He talks about this as a “moat”. Just like a moat could help repel invaders from a medieval castle, a strong competitive advantage can fend off competitors in the modern business marketplace.

In fact Coca-Cola is a good example. Its proprietary formula is impossible for a competitor to replicate exactly. That gives it pricing power, which has already lasted for many decades and could continue for a long time yet.

Among UK shares, one with a Buffett-style moat I own in my portfolio is consumer goods giant Unilever. The company owns brands like Dove and Marmite, which it would be hard for a competitor to match with their own product in quite the same way. Indeed, Buffett himself sees the appeal of Unilever and some years ago made a bid to buy the whole company. The Unilever share price is cheaper now than it was then, although the risk of cost inflation eating into profits has become more pronounced.

2. Warren Buffett takes his time

Buffett is always looking at companies. But that does not mean that he is always buying. In fact, he sometimes goes years at a time without a big share purchase. Many of his holdings have sat undisturbed in his portfolio for decades.

Like Buffett, I see no reason to rush. It can lead to far worse investment returns, even when owning good companies. Instead I am willing to wait, a long time if necessary. An example is the company Victrex. I like its proprietary technology, which I think gives it a moat. But the current share price values it at 24 times earnings. I do not think that is particularly good value for my portfolio. I am waiting and watching, though. Like other companies on my watchlist, if the Victrex share price becomes attractive in my view, I will consider adding it to my portfolio.

3. Focus on what I know

Buffett emphasises the importance of staying inside one’s circle of competence when investing.

I apply that approach when looking for UK shares to buy for my portfolio. There may be some excellent biotech shares, for example, but I do not understand their specific business area well enough to assess them. So instead, I restrict my search to what I do know.

An example is Diageo. Its business model of selling premium branded drinks like Johnnie Walker is something I understand and feel I can evaluate. I also feel comfortable assessing possible threats to its business, such as an increase in young people shunning alcoholic drinks.

Like Unilever, its brand portfolio gives it a moat and pricing power. Indeed, I see Diageo as a Buffett-style pick and would consider adding it to my portfolio for the long term.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Christopher Ruane owns shares in Unilever. The Motley Fool UK has recommended Apple, Diageo, Unilever, and Victrex. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

UK shares to buy: how I’d invest £1,000 today

on February 11, 2022

If I had a spare £1,000 to put to use in the stock market right now, how would I do it? What would be the UK shares to buy now that could meet my investment goals?

There are certainly some attractive options available right now. But even good companies can face bad circumstances. So to reduce my risk, I would diversify my holdings. Even with £1,000, it would be possible to split my funds across two or more companies.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Going for growth

One investment approach would be to focus on companies where I saw the potential for long-term growth in customer demand. An example is self-storage. With increasing property prices and a shift to working models without offices, I expect demand to keep growing in years to come for self-storage providers such as Safestore and Big Yellow. I do think the low barriers to entry of local players buying warehouses could hurt industry profitability. But I expect continued growth in demand to translate into larger revenues. Over time, I think that should be good for profits.

I also see prospects for ongoing demand growth in medical devices. As the pandemic has less effect on daily life in many markets, elective procedures in hospitals should increase in number again. That could be good news for a company like Smith & Nephew. Its range of devices is known and liked by many medical professionals. Management has set out plans to focus on improving growth rates. Ongoing delays to procedures threaten revenues and profits in the short term. But I see Smith & Nephew as a long-term success story I would be happy to own in my portfolio.

Income picks

As well as growth, I would be happy to boost my passive income streams by allocating at least some of my £1,000 to dividend shares.

Tobacco shares are a common income pick among investors. Imperial Brands yields 7.7%. Competitor British American Tobacco announced a dividend increase yesterday and yields 6.6%. Both face the risk of declining cigarette volumes hurting revenues and profits. Their premium brand portfolios may help them offset some of the volume decline by increasing prices. They are also pushing into non-cigarette products, with British American reporting a 42% jump in such revenue last year to £2.0bn. Meanwhile, cigarettes remain a cash cow.

I would also consider some insurers for my portfolio. Legal & General yields 6.4%, while rival Direct Line offers 7.3%. Both these UK shares benefit from established brands that help attract and retain customers. I expect demand for insurance to remain high in future, which could make for strong future profits. But the impact of insurance renewal pricing rules introduced last month remains to be seen. It could be a drag on profitability.

UK shares to buy now

I reckon there are a lot of attractive companies currently commanding reasonable prices in the stock market. With £1,000 to invest, I would be happy to spread my money across three or four of them in different business areas.

That would give me a small but diversified portfolio, hopefully with potential for growth as well as income. Starting with £1,000, I believe I could lay the foundations for a bigger portfolio of UK shares in future.

Christopher Ruane owns shares in British American Tobacco, Imperial Brands, and Safestore. The Motley Fool UK has recommended British American Tobacco, Imperial Brands, and Smith & Nephew. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

5 top UK shares to buy now

on February 11, 2022

With many companies recently announcing strong results for the past year, I have had my eye on some top UK shares to buy now for my portfolio. Here are five I would consider.

High street name

Banking giant Lloyds needs little introduction. As well as Lloyds itself, the company owns Halifax and Bank of Scotland. That gives it national reach. It has a strong mortgage business as the leading lender to homebuyers across the country. When conditions are good, that can be a licence to make money. In the first nine months of this year, the bank recorded £5.4bn of profits after tax. I will be looking for more good news when the company unveils its full-year numbers this month.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

If the housing market enters a downturn, that could hurt profitability at the group. But for now I continue to see upside in the Lloyds share price and would happily buy for my portfolio.

2 more top shares

Two well-known shares have seen their prices suffer from City concerns about profitability have provided me with a buying opportunity for my portfolio.

Consumer goods giant Unilever has seen its shares slide 2% over the past year, when the FTSE 100 index has added 17% in value. That reflects risks to profits from cost price inflation and doubts about the company’s strategy after its failed bid for GlaxoSmithKline’s consumer goods business. In the long-term, I think Unilever’s stable of premium brands like Ben & Jerry’s and Domestos should help it grow profits in years to come. Meanwhile, the yield of 3.8% attracts me.

An ever worse performer over the past year has been online retailer Boohoo. It has seen its stock fall to penny share territory, after tumbling 75% in 12 months. I do see risks, such as the negative impact of supply chain problems on profit margins. But the company has an enthusiastic customer base, a track record of profitability and massive space for expansion in markets like the US. I have bought it for my portfolio at what I hope will turn out to be a bargain price.

Economies of scale

I would also pick up a couple of shares for my portfolio that I see benefiting from economies of scale.

First is British American Tobacco. The company revealed in its full-year results today that revenue last year was a massive £25.7bn. British American benefits financially from the huge scale of its business. That might not ultimately protect it from declining cigarette volumes, but the company can offset some of the profit impact with price increases. What may help is growth in next-gen products like vaping. Such products saw revenue growth of 42% last year, to £2bn. A modest dividend increase means the shares yield 6.6%.

With over 7,500 employees, digital ad agency holding group S4 Capital is seeing increased economies of scale. That also brings higher staffing and management costs though, which could eat into profit margins. But I think those concerns have been reflected in the recent share price fall. I see the current S4 Capital share price as an attractive entry point for my portfolio. With a plan to double revenues and gross profits organically within three years, the company is a UK growth share positioned to benefit from an ongoing shift to digital media.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

Christopher Ruane owns shares in British American Tobacco, Lloyds Banking Group, S4 Capital, Unilever, and boohoo group. The Motley Fool UK has recommended British American Tobacco, GlaxoSmithKline, Lloyds Banking Group, Unilever, and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

3 credit cards that could improve your credit score

on February 11, 2022

3 credit cards that could improve your credit score
Image source: Getty Images

The rising cost of living has seen a surge in credit applications across the UK. Consequently, a large number of people are looking to improve their credit scores to achieve application success. Luckily, even the lowest scores can be improved through learning how to manage monthly bills. Credit builder credit cards can be great for this! Here are three cards that could help to improve your credit score and secure financial flexibility in these challenging times.

1. Tesco Bank Foundation Credit Card 

The Tesco Bank Foundation Credit Card offers a minimum credit limit of just £250, making it a fantastic choice for anyone who wants to limit the amount that they can borrow. Moreover, applicants are not required to have a good credit rating, meaning that you can apply for the card even if your score is not in great shape.

Compared to other credit builder cards, the Tesco Bank Foundation Credit Card has a low APR of 27.5%. As a result, the card is a safe option for users who have a history of late payments.

As well as the excellent APR, the Tesco Bank Foundation Credit Card has no service fees. it also allows users to access Tesco Clubcard benefits, which could help you to save money when you shop! Cardholders are also given access to Noddle support services that can help them repair a low credit score. 

2. Vanquis Visa Classic Credit Card

The Vanquis Visa Classic Card offers one of the lowest credit limits on the market! Users can cap their spending at £150, preventing them from spiralling into too much debt.

The card is a great stepping stone for those who want to improve their credit and perhaps apply for slightly more competitive cards in the future. With a high APR, users are encouraged to pay back credit on time and adopt good credit habits. 

While opting for a high APR card may seem like the poorer choice, the threat of high interest rates may force you to be more careful with your card. If you manage your Vanquis card well, you could receive a credit limit increase of up to £4,000. This could be incredibly useful as the cost of living continues to rise. The Vanquis Visa Classic Credit Card is designed for credit building. Therefore, you don’t have to have a good credit score to apply. 

3. HSBC Classic Credit Card

If your credit score is in poor shape, this could be an excellent choice for you! The HSBC Classic Credit Card offers a fairly low APR and is designed to get your credit score back on track. The card has no annual fee and offers a manageable credit limit of £250 to £1,000. The card also comes with a wide range of discounts and offers that could make it easy to eat out, shop and do more of the things you love. 

Cardholders can access their accounts through a simple mobile app, making it easy to keep on top of their score. Furthermore, the HSBC Classic Card offers an impressive 56-day interest-free period on purchases. Therefore, users have more time to repay borrowing without piling up any interest.

Things to consider before rebuilding your credit score with a credit card

While using a credit builder card is an excellent way to rebuild your score, using any kind of credit card comes with its risks. When using a credit builder, your score will only increase if you make payments on time and keep your credit usage low. If you struggle to pay back what you have borrowed or spend over your limit each month, this could negatively impact your score even further.

If you have previously struggled to make credit payments on time, it’s best to apply for cards that have a low credit limit. This will put a cap on how much you can spend, which will help you avoid spending more than you can afford to pay back. It’s also wise to make the most of message notifications and use these as reminders to pay your bills.

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Ruby is a freelance writer who enjoys writing about all things personal finance. After embarking on her own side hustle journey three years ago, Ruby is passionate about helping others to learn about the ins and outs of persona… Read More

Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

What to consider before trading shares in a turbulent stock market

on February 11, 2022

What to consider before trading shares in a turbulent stock market
Image source: Getty Images

Share trading has been challenging in 2022, with stock markets hit by concerns over high interest rates and inflation. Amid fears of a global stock market crash or recession, some investors may be wondering whether to sell their shares. For others, the downturn may provide an opportunity to buy shares at lower valuations.

Given the volatility in equity markets, it’s a good time to review your share portfolio. But what should you consider when you’re trading in stocks and shares?

Are you looking for capital growth?

You may have seen the term ‘P/E’ or ‘price-to-earnings ratio’. It’s simply the current share price of a company divided by its earnings per share.

P/E ratios are a useful measure of valuation. A high P/E shows investors are willing to pay a higher share price today because they expect substantial earnings growth in the future. Earnings growth should, in turn, drive up the share price.

Let’s take a look at the relative performance of two shares. Three years ago, Amazon was trading on a P/E of 80, compared to a P/E of 13 for PepsiCo. Over the last three years, Amazon’s operating income increased by 100% and PepsiCo’s by 10%. Investors were rewarded with a 99% increase in the Amazon share price, compared to 46% for PepsiCo.

However, a high P/E may indicate the company is overvalued, so it’s important to compare them to similar companies. Shares trading at high P/Es can also be more susceptible to shifts in market sentiment. Rising interest rates have recently hit the valuations of high-growth technology stocks, reducing the heady P/E ratio of Tesla from 244 to 184, according to YCharts.

So if you’re looking at buying ‘growth’ shares with high P/Es, it’s important to evaluate whether their growth prospects justify the share price.

Do you want an income stream?

Investors looking for a regular income stream should focus on dividend yield. It’s calculated as the dividend per share divided by the current share price.

According to Morningstar, these were the top dividend-paying stocks in 2021. Shareholders in Imperial Brands would receive an average annual income of over 8% from their investment.

Company

Expected dividend yield

Imperial Brands

8.1%

British American Tobacco

7.1%

Vodafone Group

6.4%

GlaxoSmithKline

4.7%

Smiths Group

4.5%

High dividend yields often go hand in hand with low P/E ratios. Mature companies with stable but low-growth earnings typically pay higher dividends. High P/E ratio companies tend to invest in future growth opportunities over dividends.

However, high dividend-paying companies supplying essential goods and services may weather an economic recession better than high-growth companies. This can have a positive effect on their share price as investors move away from ‘growth’ into ‘value’ shares.

How can you minimise share dealing costs?

  • Transaction costs can make a substantial dent in your profits. It’s worth taking the time to read our top-rated share dealing accounts before choosing a trading platform. Our brokerage cost calculator calculates the cost of different trading platforms based on the value of investments and the number of trades. The DEGIRO Trading Account may be attractive to high-volume traders, charging £1.75 per trade in UK shares.
  • Consider buying shares using one of our top-rated stocks and shares ISAs. You can invest up to £20,000 per year and any income or capital gain is free from tax.
  • The buy-sell spread on shares can reduce your profits. Although larger companies have a minimal spread, it can be significant for smaller companies. For example, if I wanted to buy shares in Bloomsbury Publishing through Hargreaves Lansdown, the current spread is 371p to buy and 389p to sell. The share price would have to rise by 5% before I could sell at a break-even point.

What tools help to manage risk?

Although investing in shares always carries risk, there are a couple of useful tools that can limit your exposure.

1. Use a stop-loss limit

A stop-loss order can limit losses. Your shares are sold automatically if the share price falls below the price you set. So, if I bought Barclays shares at 206p and put a stop-loss limit of 185p, my loss would be limited to 10%.

2. Consult brokers’ forecasts

I use brokers’ share price targets to help quantify potential downside risks. Searching for broker price targets for Diageo plc brings up forecasts from six brokers:

  • Diageo’s current share price is 3,755p.
  • Price targets range from 3,100p to 4,800p, with an average of 3,941p.
  • The average price target suggests a modest 5% return. However, the ‘low’ target would result in a 17% loss.

Past performance is not an indication of future results, and the value of investments may go down as well as up.

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Jo is a writer specialising in personal finance and investments. She is a qualified Chartered Accountant, previously working in M&A at a UK investment bank and Arthur Andersen. Jo has written on a range of subjects, from in… Read More

Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

How much can you have in savings on Universal Credit?

on February 11, 2022

How much can you have in savings on Universal Credit?
Image source: Getty Images

The government has announced proposed changes to Universal Credit in the UK. While Universal Credit can help to relieve the stress of affording living costs if you are on a low income, claiming the government benefit could put a limit on your savings potential.

Many credit claimants don’t realise that savings play a huge role in their eligibility! In fact, those who are currently on Universal Credit could lose their benefit by going over the savings threshold! So, how much can you save whilst receiving Universal Credit? 

What’s the maximum you can have in savings on Universal Credit?

Building savings is a great way to secure your financial future and prepare for unexpected expenses. However, those who are seeking to access Universal Credit may need to be aware of limits around the amount of savings they can have.

The current Universal Credit guidelines state that claimants cannot hold more than £16,000 in savings. If you’re submitting a joint application, this means that both you and your partner must have no more than £16,000 stored away.

Because of this, those wishing to claim Universal Credit need to be wary of the amount they have in savings. Those with savings of more than £16,000 as a single claimant or as a couple will not be entitled to Universal Credit.

Can you get Universal Credit with savings under £16,000?

If you have savings under £16,000, you may still be eligible for Universal Credit.

Any savings up to £6,000 are not calculated into your monthly income. This means they will not affect your eligibility. However, any savings between £6,000 and £16,000 will affect how much you can receive.

Savings of more than £6,000 are counted as part of your monthly income. For every £250 in savings that you have (over £6,000), £4.35 will be added to your total monthly income.

Therefore, if you have £7,000 in savings, £1,000 of this would be calculated into your income, which would give you an additional monthly income of £17.40 (£4.35 x 4). Those with savings of £16,000 would have £435 added to their monthly wage.

Will savings reduce my Universal Credit allowance?

Savings of between £6,000 and £16,000 will reduce the amount of Universal Credit you can receive. Savings are calculated into your monthly earnings and for every extra £1 that you earn, your allowance will be deducted by £0.55p.

As a result, if your savings add £100 to your monthly earnings, your credit allowance will be reduced by £55 per month.

However, those who qualify for Work Allowance may be able to avoid this reduction. Work Allowance is a government benefit that limits the amount that your universal Credit can be reduced.

How else can Universal Credit claimants save?

If you are on Universal Credit and want to increase your savings, you may want to consider opening a Help To Save account. Help To Save is a government-run savings account for anyone who is entitled to Working Tax Credit or Universal Credit.

Through the savings account, savers can receive a bonus of 50p for every £2 that they save. You can use the account for up to four years and can save between £1 and £50 every calendar month. Savers can pay into the account as many times as they like, as long as they don’t exceed their £50 per month limit.

Money that is saved into a Help To Save can be withdrawn into your bank account after the four-year period.

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Ruby is a freelance writer who enjoys writing about all things personal finance. After embarking on her own side hustle journey three years ago, Ruby is passionate about helping others to learn about the ins and outs of persona… Read More

Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

These were the most bought ISA stocks and shares last month

on February 11, 2022

These were the most bought ISA stocks and shares last month
Image source: Getty Images.

Taking a look at the most-bought stocks and shares investors are holding in ISA accounts is a great way to get some insight and inspiration.

To give you a better understanding of the investing world right now, I’m going to reveal the most popular investments for Freetrade ISA holders. I’ll also explain what you need to know about ISAs and how you can invest using one.

Why is a stocks and shares ISA account useful?

A stocks and shares ISA is a type of savings account that you can use to invest and put your money to work. Currently, you can put up to £20,000 each tax year into one of these amazing accounts.

Why are they amazing? Well, any gains made on your investments held in a stocks and shares ISA are free from tax – for life!

The limit can change, so it’s always best to try and make the most of your allowance each year. That’s because any unused portion of your annual allowance doesn’t roll over to the next financial year. But, if you use this type of account to its full potential, you can build some serious tax-free wealth in a completely legal way.

Now that you’ve brushed up on your ISA knowledge, let’s take a look at the investments most popular with some ISA holders.

What were the 10 most-bought ISA stocks and shares last month?

According to the latest data from Freetrade, these were the stocks and shares that investors were stuffing into their ISA accounts in January:

Rank Investment
1 Tesla (TSLA)
2 Vanguard S&P 500 UCITS ETF Dist. (VUSA)
3 Vanguard S&P 500 UCITS ETF Acc. (VUAG)
4 Microsoft (MSFT)
5 Apple (AAPL)
6 AMC Entertainment (AMC)
7 Amazon.com (AMZN)
8 Vanguard FTSE All-World UCITS ETF Dist. (VWRL)
9 Alphabet (GOOGL)
10

GameStop (GME)

Do these stocks and shares tell us anything interesting about ISA investors?

There’s a fairly diverse selection of investments. It’s encouraging to see one global equity fund (Vanguard FTSE ALL World) on the list, which is a solid broad index fund to invest in.

However, the majority of picks focus on US-based funds, tech stocks and (worryingly) meme stocks. Here’s a quick breakdown of each category.

US index funds

Stocks and shares in the US have had a turbulent time lately with high inflation figures and rising interest rates on the horizon.

The tech- and growth-heavy S&P 500 has been suffering as a result, and it looks like investors have been grabbing both the Vanguard S&P 500 (VUSA) and the Vanguard S&P 500 (VUAG).

These exchange-traded funds (ETFs) focus on tracking the same index. The difference is just that VUSA pays out any income (like dividends), whereas VUAG reinvests straight back into the fund.

Tech stocks

Because of the tax benefits, many ISA investors use this type of account for long-term investing and wealth building. So, the inclusion of the following stocks is because investors are confident of the bigger picture:

  • Tesla (TSLA)
  • Microsoft (MSFT)
  • Apple (AAPL)
  • Amazon.com (AMZN)
  • Alphabet (GOOGL)

The investments above have seen a lot of volatility and price dips lately. But, ISA investors seem confident that they’ll recover and remain the global top dogs.

Meme stocks

It’s fairly surprising to see that meme stocks are still featuring strongly for UK investors. These stocks have had plenty of airtime over the last year, so the less said about these picks the better!

How can you invest in a stocks and shares ISA?

If you don’t already have an account set up, we’ve compiled and rated some of the top stocks and shares ISA accounts on the market.

It’s important to find an account that suits your investing strategy. Then, you can start researching and picking investments. Broad funds are a good place to start, but if you’d like to do some individual stock-picking, The Motley Fool’s Share Advisor service is great if you need a helping hand.

The end of the tax year is fast approaching, so you have until 5 April to make the most of your allowance! Just remember that all investing carries risk. So, invest wisely and don’t put more into the markets than you can afford to lose.

Please note that tax treatment depends on the individual circumstances of each individual and may be subject to future change. The content of this article is provided for information purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

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Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.

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