Blog #1: portfolio investments in relation to Queen Elizabeth II's investments

Today, I am going to blog about Queen Elizabeth II's portfolio investments and whether portfolio investment is a good idea.

I have learned about portfolio theory back then when I was at college. It is deemed to be a quite an important topic relating to investment and finance. I remember that I came across the word 'investment' even before learning about it in college. My dad has a lot of experiences on investments as he has already been doing it for 25 years. He taught me to not invest all my money on one particular investment, but to diversify them.

I came across a news on Queen Elizabeth II's portfolio's investment and found it to be quite interesting. Here is a little background-
Queen Elizabeth II is the longest-reigning monarch in the British history today. According to an analysis by Bloomberg Billionaires Index, her personal fortune is estimated to be $425 million, while $75 million of it consists of her investments. According to Financial Times, most of her investments are UK equities, art, property, UK bonds and sterling bills.

Image source: (Financial Times, 2015)

As you can see from the graph above, the returns on investments have increased over the years since 1952 up to today. The highest return from the investments is the UK equities, followed by art, property and others. 

I am impressed with how artworks can have such big returns on investment. As much as I know from the graph, it is seen as one of the best assets over the years (even bigger return than property). Financial Times states that it is making 3% a year above inflation, which means it has resulted in good amount of profit. It is also said that the price of art at London sales has risen. It proves to be quite a good investment. Kudos to the Queen for having artworks as one of her investments and collection. I believe that prices of artworks will continue to rise as they age. As quoted by Telegraph (2015), "the global art market is booming, with last year's sales reaching a record £37bn, a 7pc year-on-year increase and a little above the 2007 high of £35bn, according to the most recent figures from the European Fine Art Foundation (TEFAF)". If i have the money, I would invest in artworks too, as there are chances of getting better returns in the future.

Queen Elizabeth II has also invested in British housing. I truly believe that the price of British (especially London) housing would rise in the future as you can see from the graph below:

Graph showing the prices of London housing property
Source: Telegraph UK 2014

The graph shows that the price of London housing increased sharply since early 2009. The overall price of UK housing is also increasing. Is investing in British housing a good idea? In my opinion, it 'can' be. Few months ago, I have read news regarding the housing crisis of London. London property has been an attraction for foreigners to invest in. London has been suffering from a severe shortage of housing. According to YouGov survey, it is said that almost half of Londoners think wealthy people from overseas buying top-end property as an investment has been the main cause of London house price boom. Therefore, house prices have been rising rapidly over the years. Furthermore, average house prices have rose to over 15 times more than average incomes. This made renting property in London to be very expensive which can result in faster return on investment. Fact: London housing has risen up to 44% over the past seven years (Financial Times, 2015). This happens in other parts of Britain as well. Yes, I can't deny the fact that there might be risks in investing such big sum of money on housing. Who knows house prices are gonna fall late this year or next year? We can't be 100% optimistic about it. 

When it comes to investments, we would picture them going up and up. Of course I wouldn't invest if I believed that I was going to lose money, but a degree of realism is useful. We need an appreciation of the risk involved. Although history might show rises over the long term investment, however we have to be prepared that it may go down the next day/ month/ year. Potential growth is not the same as promised growth. With the credit crunch crisis on 2008, Queen Elizabeth has also lost an amount of money. There is never a guarantee of positive returns on investment. 

Everything sums up to a question: is portfolio investment a good idea? Well, it really depends. But if you ask me, I would be more on the 'yes' side. I believe the theory about don't put all eggs in just a basket. With more investments, the lower the risk of you losing everything. There is at least some backups if one or two of them has gone bad. Personally, I think it would be more reasonable to invest in projects with lower risk even if it means there will be lower returns. Also, the investments that I am going to make, I would make sure they are not co-related to each other to avoid risks of losing more.How people invest depends on what kind of risk taker they are. Therefore, there is no real answer to that question. 

Sources:

http://www.ft.com/cms/s/0/1c728c46-5634-11e5-9846-de406ccb37f2.html#axzz42iBIGV6G

http://www.telegraph.co.uk/news/uknews/theroyalfamily/3386353/The-Queen-asks-why-no-one-saw-the-credit-crunch-coming.html

http://www.bloomberg.com/news/articles/2015-09-08/the-longer-she-reigns-the-less-wealthy-queen-elizabeth-ii-looks

http://www.theguardian.com/society/2015/mar/14/britain-housing-crisis-10-ways-solve-rowan-moore-general-election

http://www.ft.com/cms/s/2/8ef50668-63b3-11e5-9846-de406ccb37f2.html#axzz42iBIGV6G

http://www.telegraph.co.uk/finance/personalfinance/investing/11519612/Beware-the-risks-before-investing-in-the-booming-art-market.html

Digby Jones on Hereford Furniture

Furniture is an absolute necessity in this society. Every home needs furniture. There are several types of furniture with different designs to match the wants of different types of consumers. Hereford Furniture, a family owned business with over 40 employees, was making a loss of £80,000 the past year, therefore, the hero, Sir Digby Jones helps them by identifying the problems they have. "His mission is to turn survival into success and secure the future of the workforce" (BoB National).

Hereford Furniture's focus

After watching the video of Digby Jones: The New Troubleshooter episode 1, I realised that it is very important for businesses to put their focus on a particular area rather than having all at once. As for this case, having to manufacture, retail and import are the three main things that Hereford Furniture is focusing on, which is quite a lot and the focus can be diversified. Furthermore, they were producing up to 15,000 pieces of furniture with different designs, colours and shapes in a year. With the number of employees, it is really difficult for them to handle when they are also not expertise in every area. Therefore, according to Digby, it is best for Hereford Furniture to focus on one area with the most knowledge to increase the chance of being successful.

Hereford Furniture's communication

Communication is one of the keys to success. During the interview of Mike Muxworthy, the owner of Hereford Furniture, and the employees, Digby Jones found out that they have poor communication and that the employees' relationship with Muxworthy was not adequate. Without effective communication, the level of productivity will decrease. This is one of the issues that Hereford Furniture has to work on.

Rebranding Hereford Furniture

Another problem that Sir Digby Jones addresses is the name of the brand. They have changed their company's name to 'Hygge', which changes the whole feeling and meaning of the company. The name stands for warm, big home and love. It is also a very unique and catchy word, which can be easily remembered. By having a special and meaningful name, it can totally change the outlook of the company. They also came up with a logo for their product. It is an effective way to promote their product and to create brand awareness.

With the case, Sir Digby Jones has successfully changed the nature of the company and helped them to become more successful by lending a hand that they needed.