Podcast Summary
Express love and appreciation, Make informed investment decisions, Prioritize quality sleep: Celebrate Mother's Day with a heartfelt gift from Blue Nile, Be cautious with big pharma investments, Consider premium bonds for higher taxpayers, Invest in individualized comfort for better sleep, Top footballers have diverse financial strategies for retirement
This Mother's Day, express your love and appreciation to the extraordinary women in your life with a heartfelt gift from Blue Nile. Their exquisite pearls and mesmerizing gemstones are sure to impress. Plus, enjoy fast shipping options and quality products. Meanwhile, investing in big pharma companies might not be the best bet for your portfolio, according to veteran investor Terry Smith. He believes the sector has been malfunctioning, and its accounting practices are a concern. Instead, Terry suggests considering alternatives like premium bonds for higher rate taxpayers. In the world of sleep, the Sleep Number Smart Bed offers individualized comfort for better sleep together. And, top footballers have various financial strategies to make their earnings last after retirement. Overall, this week's Money Show discussed the importance of expressing love and appreciation, making informed investment decisions, and prioritizing quality sleep.
Excluding certain costs from reported earnings: Pharmaceutical companies can present a distorted view of their financial performance by excluding certain costs, such as acquisitions, restructuring, and legal costs, from reported earnings, leading investors to consider misleading earnings figures.
Pharmaceutical companies, such as AstraZeneca, are focusing investor attention on an earnings number that is significantly higher than the actual accounting reported earnings. They achieve this by excluding certain costs, such as acquisition, restructuring, and legal costs, from their reported earnings. These costs are mostly cash expenses, but they are written off as non-cash goodwill items. While this practice is not illegal, it can be misleading, as it presents a distorted view of the company's financial performance. Instead, investors should look at earnings that are in line with generally accepted accounting principles to get a clearer picture of a company's financial health. The pharma industry's heavy spending on acquisitions, which is not resulting in new blockbuster drugs, and the inefficient development of drugs due to the focus on renewing pricing power, are also concerns.
Pharmaceutical sector's popularity may lead to overvaluation: Investors should consider sectors like medical equipment for better value and avoid overvalued pharmaceutical companies
The popularity of the pharmaceutical sector among investors and its steady returns should not be seen as a positive sign, as it may lead to overvaluation and misallocation of capital. The speaker believes that some pharmaceutical companies, like AstraZeneca, are overvalued based on their reported earnings, and the sector's recent buying spree of biotechnology companies at premium prices could harm investors in the long run. Instead, the speaker recommends considering sectors like medical equipment, which produce good value at the moment. By focusing on sectors where companies allocate capital wisely, investors can potentially avoid the risks associated with overvalued and mismanaged companies.
Investing in unglamorous industries: Consider investing in medical devices, old line IT businesses, and premium bonds for diversification and potential returns. Companies like Fundsmith suggest eyeglass lenses, hearing aids, artificial joints, Oracle, Microsoft, Sage, and Intuit. Premium bonds offer tax-free returns and occasional prizes, but returns are not guaranteed.
There are investment opportunities in relatively low tech industries, such as medical devices and old line IT businesses, which have been overlooked due to their lack of glamour but are poised to benefit from demographic trends and offer good value. Terry Smith, founder of Fundsmith, suggests looking into companies that manufacture eyeglass lenses, hearing aids, artificial joints, and IT businesses that have been around for a while, like Oracle, Microsoft, Sage, and Intuit. Another investment option Paul Lewis, a big investor in premium bonds himself, highlighted is premium bonds. He likes them because, on average, you can win around 2 prizes a month, and they are tax-free for higher rate taxpayers, making the effective interest rate around 2%. However, it's important to note that the interest rate and the prizes are not guaranteed, and you might win nothing for several months. Despite their simplicity, these investments offer potential value for those looking for diversification in their portfolios.
Premium Bonds: Instant Access and Potential Wins, but Long Odds: People find value in Premium Bonds for smaller wins and tax-efficient savings, despite long odds of winning the jackpot. Football stars face unpredictable earnings and need sound financial management.
Premium Bonds offer instant access to your money and the chance to win prizes, including the £1,000,000 jackpot, but the odds of winning the jackpot are extremely low, with an average wait of 47,000 years for one person to win it with the maximum bond holding. Despite this, some people still find value in the potential for smaller wins and the tax-efficient savings aspect. In the world of football, despite high earnings, money management is still crucial due to the unpredictability of earnings and potential financial mismanagement. The upcoming FT Money relaunch will feature interviews with advisers to sports stars and a cover story on their financial strategies.
Managing Footballer's Earnings: Three Pots Approach: Footballers should divide their earnings into three pots: one for spending, another for debts and assets, and the most crucial one for investments to secure their financial future.
Premier League footballers face a significant challenge in making their earnings last a lifetime, with an average career span of only eight years and high taxes and fees reducing their income by half. To help them manage their money effectively, financial advisors recommend dividing it into three pots: one for day-to-day spending, another for mortgages and cars, and the most crucial one for investments. However, despite this advice, many footballers still face financial struggles due to poor investment choices, gambling problems, and high rates of divorce after retirement. These issues can lead to financial instability and even bankruptcy. It's essential for footballers to receive financial education early in their careers and to prioritize saving and investing to secure their financial future.
Discussing Footballers' Finances and Women's Roles: Victoria Beckham's success, footballers' financial planning, use of premium bonds, pension planning, cash instead of cards, pension changes for women, ethical shopping, Quince's affordable luxury, and 1-800-Flowers' Mother's Day discounts.
While there may be high-profile cases of footballers experiencing financial difficulties, it's important to remember that many women play significant roles in their partners' careers and financial planning. Victoria Beckham serves as an example of a successful career for a woman in this context. In the latest edition of Feet Money, James Pickford discusses footballers' finances, including their use of premium bonds and pension planning. Readers can also find articles on using cash instead of cards, pension changes for women, and ethical shopping. Remember to share your thoughts on these topics by emailing money@ft.com or tweeting @FTmoney. In addition, Quince offers luxury items at affordable prices, and 1-800-Flowers helps you celebrate Mother's Day with discounts on gifts.
