A key benefit of commodities for investors is their low performance correlation with other asset classes. Indeed, many commodity sub-sectors do not even have a high correlation with each other. So, a diversified selection of commodities can provide a useful way of managing risk within your portfolio. As commodities are physical, tangible assets, many investors perceive them to be a safer investment option than the intangible options. However, they would not be suitable for income investors as there is no ‘dividend’ as there is with some equities.

In recent years, the strength of some commodity prices have been boosted by demand from global powerhouses such as India and China and this demand looks set to continue. However, those same commodities have also been blamed for causing rising inflation (when demand exceeds supply this can create inflationary pressures as prices are driven up by those most desperate to buy). Since there is strong demand but a finite supply of most commodities, this may continue to be a problem until alternatives are found.

As a UK investor, you can invest directly in commodities, although this isn’t really practical for most – after all, where would you store a million tonnes of copper? Even in professional circles, most commodities trading is typically done using futures and options, as these allow investors to speculate on prices of future deliveries before they arrive.

For the average investor, however, there are pooled products which invest in a range of different commodities, or gain exposure to the sector through the shares of companies operating in it. Finally, you could choose funds that target commodities sector stocks. But remember, even if you just own a FTSE 100 tracker fund, you will already have some exposure as oil and mining stocks are well represented amongst the largest in the UK. You don’t want to end up over-exposed without realising it.

Annuity providers work on the basic principle that the longer they have to pay you, the less the payment amount will be. Therefore, as you get older (and your life expectancy gets shorter), annuity rates generally improve. Consequently, deferring your pension payout for a few years could almost certainly result in a higher income.

There are three main reasons why you might consider deferring payments from your pension: One, interest rates are historically low – and waiting may secure a more favourable annuity rate should interest rates go up; Two, you may decide to continue in paid employment, which will support you in the short-term; Three, you may want to purchase a joint life annuity, but have a younger partner. Waiting until that partner is older should also help secure a better rate on the annuity.

On retirement, you can take a tax free lump sum of 25% of your pension fund. However, unlike some employer’s schemes where, if you take your lump sum, you must also buy an annuity at the same time, for a personal pension plan, the Government allows you to defer the annuity purchase – potentially up to age 75 (when your situation must be reviewed). In the interim, the money remains invested, perhaps even benefiting from growth if market conditions are favourable, although of course, if markets are not, the value could also fall.

There is even now a deferment option for the state pension scheme. Since April 2005, for every 5 weeks you put off claiming your state pension after state retirement age, your later payments increase by 1%. If you defer for a year, you get 10.4% extra – currently worth over £470 per year on a full state pension (based on 2008/09). Alternatively, you can take the extra as a lump sum payment – equal to the amount of pension you have forgone, plus a little for the interest it would have earned in a bank account. While this approach may not be right for everyone, if you can afford to defer it could be financially worthwhile.

It should be no different with investment planning but unfortunately, for most, it is rather boring.

However, there is light at the end of the tunnel. By taking some time with a financial planner who understands investment planning, a lot of the hard work is taken out of the decision making process. So what needs to happen to make investing as interesting as buying a car?

The PPA service brings solutions to all of the following points:-

•    How to decide your investment objectives – an essential starting point
•    How to decide your attitude to risk and loss
•    How to reduce investment risk and potential losses
•    How and why you should diversify your investment portfolio
•    How to decide which asset classes should be considered
•    How to get to grips with ‘asset allocation’
•    How to utilise the features and benefits of ‘collective’ investments
•    How to measure investment performance and why you should
•    How to take advantage of your Capital Gains Tax exemptions
•    How to generate tax free cash inflows from your investments
•    How and why you should review your portfolio regularly

PPA can help you with investment planning as part of our comprehensive Financial Planning or as ‘one off ‘ advice.