Why I’d dump both Petrofac Limited and Royal Dutch Shell plc


Over the past three years of depressed oil prices Petrofac (LSE: PFC) has proven the resilience of oil services firms’ business model. While its share price has suffered during this time, the company has continued to post solid profits and return very healthy dividends to loyal shareholders.

Yet while this business model is sound, the Serious Fraud Office (SFO) corruption investigation currently under way, combined with persistently low oil prices, are reason enough for me to avoid buying shares of the firm today, despite what is looking like a very attractive valuation.

The problems with the SFO investigation are twofold. First off, there is the very real possibility of a large regulatory fine. Some analysts are mulling over the possibility of fines reaching as high as $800m. A fine of this size, or even a considerably smaller one, could be disastrous for income investors because this is nearly four times last year’s total dividend payouts of $224m. Furthermore, although net debt at year-end was $617m, or just 0.8 times EBITDA, a fine this large would not be good for the balance sheet.

So while the company could survive a large fine with more debt and suspended dividend payouts, its share price would likely head further south. And the larger worry with the SFO investigation is that founder and CEO Ayman Asfari may be embroiled in it. We’ve already seen the longstanding COO suspended by Petrofac and removed by the board, showing that they are taking seriously the possibility of C-suite heads rolling as a result of the inquiry.

Losing Asfari or other long-serving management team members would be a significant hit to the investment thesis of Petrofac, especially since management’s ties to Middle Eastern oil companies have long been a key reason to invest in the firm. This isn’t to say the share price won’t rebound nicely, but with a serious cloud such as this hanging over the company, I wouldn’t countenance purchasing shares.

Safe and stable? 

Another problem for Petrofac, and an even bigger one for Royal Dutch Shell (LSE: RDSB) is, of course, the fact that oil prices continue to hover under $50/bbl, despite attempts by oil majors and OPEC alike to engineer a price rise through supply cuts.

The good news is that through slashing operating costs and taking an axe to exploratory capex, Shell has been able to largely balance the books. In Q1 the company recorded $3.8bn in constant cost of supplies earnings as the average price per barrel of oil rose by nearly $4 quarter-on-quarter and capex was cut from $6.9bn to $4.7bn.

Earnings of this level should mean the company’s dividend is safe for the time being as they covered the $2.7bn in cash and $1.2bn in scrip paid out during the quarter. But I remain leery of buying the company’s shares at this point. There is little sign of oil prices recovering due to either substantial supply cuts or a rapid increase in global demand for petroleum products, not to mention the poor long-term outlook for fossil fuel demand.

This leaves Shell a very nice income stock, but one that is trading at a pricey 15.7 times forward earnings and is still highly indebted with gearing at 27.2%. I reckon there are much better income stocks out there for long-term investors.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of Petrofac. The Motley Fool UK has recommended Royal Dutch Shell B. 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.

Diversification could boost your investment returns… or it could damage them!

stock market chart

When faced with the idea of investing all their long-term savings in shares, most people would probably react in horror. A stock market crash would wipe you out, wouldn’t it?

That thinking has created the profitable business of asset allocation — profitable to those who manage investments, that is. This amount in shares, so much in gilts, another portion in company bonds… you know the idea.

Set against that we have the Barclays equity-gilt study, which shows that shares have been the best performing investment from 1899 to 2016, beating cash in a savings account in 91% of all rolling 10-year periods. Extended to 18-year periods, shares have won 99% of the time. And over 23-year periods, cash has never beaten shares.

If you have an investing horizon of 20 years or more, you’ve almost certainly got more to lose from inferior performance and management fees by diversifying into all sorts of other investments, than if you stick with shares.

A mixed bag of funds?

Having decided on the stock market, many folk then turn to managed funds and start fretting over diversifying those. How much should I put into UK income? Emerging markets? Small-cap growth? There are funds of funds, which do the diversification into different individual funds for you… but that just adds another level of management charges.

I’d say all that diversifying into different funds achieves is the increasing likelihood that you won’t even match a FTSE 100 index tracker. In fact, there are very few investment managers who can beat the FTSE in the long term — I can think of Warren Buffett and our very own Neil Woodford, but then I’m scratching my head.

If you really want a fund, I’d say go for an index tracker and forget fund diversification.

Individual shares

When we choose and buy our own shares, using a low-cost execution-only broker, we’re finally coming to a stage when diversification does make sense. But even then, it still comes with qualifications.

I certainly wouldn’t put all my money into one stock, because even with those that look safe we can hit a catastrophe that sends them crashing. So spreading your investments across different sectors can definitely help — if only, say, 5% or 10% of your portfolio had been in banking shares, the financial crisis would still have hurt, but relatively lightly.

A well-diversified portfolio can be put together from just our top FTSE 100 shares. A big oil company like BP or Royal Dutch Shell, one of the major banks, GlaxoSmithKline or AstraZeneca from the pharmaceuticals sector, utilities provider National Grid, consumer goods giant Unilever… and you already have the makings of a well-diversified portfolio (without paying anyone a penny to do it for you).

Different methods

Another approach is to diversify by strategy, for example, holding a number of safe dividend-paying shares and then putting some of your money into riskier (but potentially more rewarding) growth candidates.

Or spread your money by market capitalisation, with some invested in very large companies and some in smaller cap firms.

The choice of strategy is yours alone, but there’s one rule that I always stick to. I will only ever invest in a share that I genuinely think is a great investment. If I wouldn’t buy on its standalone merits, I’d never buy a share just to diversify — that’s di-worse-ification

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended AstraZeneca, Barclays, BP, and Royal Dutch Shell. 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.

These quality shares now trade on appealing valuations. Time to buy?

Thanks to recent falls, the shares of some high-quality companies are now starting to look fairly cheap relative to their historic valuations. Here are just a couple that have caught my eye.


I’m not sure how much longer I can put off investing in small-cap design and engineering group Avon Rubber (LSE: AVON), particularly given after last month’s interim results underlined just how well the company is performing.

To recap, revenue and operating profits increased by 22% (£90.7m) and 21% (£10.9m) respectively over the six months to the end of March, albeit boosted by favourable foreign exchange rates. At £17m, underlying cash from operations was 16% higher than over the same period in the previous financial year. The outlook for the company’s two divisions — Protection and Dairy — also remains positive, with the former benefitting from a recent contract win to supply roughly 37,000 respirators and accessories to an “unnamed customer“. This, according to CEO Paul McDonald, reflects the company’s “further expansion into foreign military markets”.

At 16 times predicted earnings for 2017, geographically diversified Avon is good value in my opinion, particularly as its valuation has been a lot higher in the past. Assuming EPS growth forecasts are hit, this number drops to 15 in 2018.

With £12.6m in net cash (compared to the £8.4m debt figure recorded by the firm in March 2016), it boasts a suitably robust balance sheet. Its ability to generate excellent levels of free cashflow has led to 20%+ annual hikes to the dividend for many years now (with a 30% increase to the interim payout being announced in May). 

Solid results, confident management and great fundamentals — am I missing something?

Time to grab a slice?

Domino’s Pizza (LSE: DOM) is consistently cited as having all the hallmarks of a quality business: exceptional returns on capital, a bulletproof balance sheet and decent cashflow.

Since hitting a high of 396p last August however, shares in the Milton Keynes-based company have fallen heavily. The reason? It all seems to be down to expectations.

The slide began in March when the company announced that UK sales growth had slowed to 7.5% in 2016 — down from 11.7% the year before. While disappointing, the 12% fall on the day felt like an overaction when there was still plenty for shareholders to be happy about. In addition to opening 81 new stores over the year, the £1.4bn cap was continuing to see the fruits of its investment in its UK digital offering with 72% of system sales coming from online (a rise of 21% year-on-year). Its international operations were also doing well, with both the Republic of Ireland and Switzerland delivering solid year-on-year growth. 

Unfortunately, the lack of a swift reversal in UK trading since the start of the new financial year has led analysts to revise their earnings estimates and heap more pressure on the share price. 

Is Domino’s doomed? Of course not. A slowing of growth is nothing to celebrate but I see this as simply a temporary blip and share CEO David Wild’s confidence in the “resilience and long-term potential” of the company’s business model. 

With its growing international footprint and market-leading position, I regard Domino’s as a great buy at the current price, even if a valuation of 19 times earning for 2017 (reducing to 17 in 2018) might still be regarded as too expensive by some.

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Paul Summers has no position in any shares mentioned. The Motley Fool UK has recommended Domino’s Pizza. 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.

Why I’d dump these 2 dangerous FTSE 250 dividend shares


Even though trading at The Restaurant Group (LSE: RTN) has shown green shoots of recovery recently, I reckon investors should resist the temptation of piling back in as the eateries giant’s turnaround story remains fraught with danger.

The Frankie and Benny’s owner flipped higher last month after news that like-for-like sales edged down 1.8% during the 20 weeks to May 21. While far from impressive at face value, it led to chatter that the restructuring strategy is beginning to pay off but underlying sales fell by a more painful 3.9% in the 12 months to January.

But investor enthusiasm fizzled out almost immediately as fears over the structural woes facing the business resurfaced. With the bulk of The Restaurant Group’s sites being located in or around Britain’s retail parks, the company is likely to see footfall keep decreasing as tough economic conditions cause shoppers to stay at home. And the rapidly-growing internet shopping phenomenon is pulling even more potential diners away from its doors.

And increasing competition puts the recovery plan in even more  jeopardy.

Dividends diced

The Restaurant Group was forced to scythe the dividend in the year to January 2017 as earnings swung 19% lower, the company paying out 15.84p per share versus 17.4p in the previous year. And with City brokers expecting another 19% decline in the current fiscal period, another dividend reduction, to 15.4p, is currently being bandied around.

While this figure still yields a healthy 4.6%, flimsy dividend coverage of 1.4 times — some way below the widely-regarded safety benchmark of two times or above — makes me more than a tad wary that current payout projections will be met.

I reckon investors should be prepared for a much more painful payout cut than is currently predicted.

Dangerous driller

I also believe risk-averse share pickers should give Wood Group (LSE: WG) a wide berth, despite predictions of meaty near-term dividends.

The oilfield services play is expected to raise 2016’s dividend of 33.3 US cents per share to 33.4 cents in the current period, meaning it sports a market-beating 4% yield.

The number crunchers see no return to earnings growth any time soon however, and Wood Group is expected to follow last year’s 23% earnings drop with an additional 17% fall in the current period. As a consequence, dividend coverage clocks in at just 1.6 times.

Regardless of whether or not Wood Group’s proposed merger with Amec Foster Wheeler is hampered by the Serious Fraud Office probe into Unaoil — Wood has launched an internal review into its own dealings with Unaoil, while Amec has been asked to provide information to the SFO on its history — the murky state of the oil market would discourage me from spending my own investment cash right now.

Brent crude prices have receded to their lowest since November below $45 per barrel this week, and I expect the downtrend to continue as returning US shale producers keep the oil glut in business. In this environment, I would expect demand for Wood Group’s services to remain subdued, and reckon earnings are in danger of stuttering lower well beyond this year.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

2 fast rising FTSE 100 growth stocks I’d buy today

FTSE 100 rising prices

Shares of quality assurance tester Intertek (LSE: ITRK) have enjoyed a blistering start to the year, up 26% since the beginning of January. And I reckon that the combination of secular tailwinds at its back, the weak pound and internal changes mean this rapid share price appreciation may continue for a long while yet.

The secular tailwinds propelling the company’s growth are the increasing globalisation of product development, sourcing and manufacturing that are constantly under increased regulatory and shareholder scrutiny. This is where Intertek steps in to provide quality assurance at every step of the process, making it a vital link in the risk management system of any multinational firm.

As this is by its nature an international business, Intertek is currently reaping the rewards of the weak pound. In the first quarter of the year, sales rose 14.2% year-on-year with a full 12.4% of this improvement down to currency translation benefits. With little signs of sterling making a recovery any time soon, it certainly appears the company will continue to benefit from this trend in the coming quarters.

Finally, management has been rightfully prioritising growth in the high margin, high growth products division rather than in the cyclical natural resources or trade divisions. Increased attention to this segment is paying off with organic growth of 5.8% in Q1 bolstered by continued acquisitions.

On top of significant growth opportunities, Intertek is also in a great position financially with net debt a reasonable 1.5 times EBITDA, a highly profitable business that produced £318m in free cash flow last year on £2.5bn in sales and operating margins that improved to 16%. All of these characteristics lead me to believe the company’s shares are worth buying right now despite trading at 24 times forward earnings.

The benefits of Brexit

Another FTSE 100 giant whose shareholders have enjoyed 2017 immensely is Croda (LSE: CRDA). Shares of the speciality chemical maker are up 24% to start the year as the weak pound and solid results have increased investor optimism.

While a large part of the 19.1% year-on-year sales increase posted in Q1 was down to the weak pound, organic growth of 4.9% is great to see and points to management’s successful trading strategy. This strategy is to re-focus on its core business, transition from distributor to direct sales model in key regions, and to take advantage of overall market growth through constant product innovation.

The benefits of operating as a major player in a relatively niche industry is that Croda enjoys very impressive pricing power. We see this in the company’s 2016 results where operating margins rose to 23.9% due to continued focus on cost-cutting, a different mix of product sales and the weak pound.

With margins this high the business is also kicking off impressive cash flow, despite heavy capital investments. Last year free cash flow was £155.5m from £1.2bn in sales, which helped keep leverage down at 1.1 times EBITDA. As a major producer of chemicals for personal care products such as make-up, Croda’s performance is tied to that of the global economy. But with high margins and solid growth prospects, I reckon the company’s shares are worth a second look, trading as they are at 22 times forward earnings.

Brexit and the weak pound may be helping Croda and Intertek but it’s also causing myriad headaches for everyone from retail investors on up to giant institutional investors. But the Motley Fool firmly believes this period of extended volatility can be an asset as well as a hindrance, which is why they’ve written a free 5 Step Guide To Surviving Brexit.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended Intertek. 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.

Should you forget capital gains and just focus on dividends?

While many investors seek capital gains when investing, the reality is that dividends often make up a large proportion of total returns over the long run. Therefore, it could be argued that investors should pay as much attention to their income return as they do to their potential for capital growth. In fact, it could even be argued that focusing only on dividends, and not on capital gains, could be a sound long-term strategy.

Total return

Clearly, the dividend yield on indices across the globe varies significantly. In the US, for example, the S&P 500 currently has a dividend yield of around 2%, while in the UK the FTSE 100 yields 3.8%. Within those indices are a range of dividend yields, with it being relatively straightforward to generate a dividend yield of 4% in both markets, and in stock markets across the globe.

Historically, investors have generated a total return from investing in shares in the high-single digits. Therefore, it could reasonably be argued that dividends could make up at least half of total returns, and possibly more if an investor focused on buying the highest-yielding shares available. Logically, they should therefore spend at least half of their time focusing on the affordability of dividends, a company’s financial strength and the future growth rate of shareholder payouts.

Growth potential

Clearly, companies operating in different industries and in different regions will have dividend growth rates which vary considerably. Some stocks may be able to offer double-digit dividend growth, while others may only be able to keep pace with inflation. In either case, however, a growing dividend can mean that an even higher proportion of total returns are generated from income returns, rather than capital growth, over the long run.

For example, a company which pays a 4% dividend yield today will not only generate an income return on reinvested income, but also potentially offer a rising income return due to dividend growth. Over a long period of time such as a decade, for instance, even a 5% dividend growth rate on a stock which yields 4% can lead to an income return of 6.5% on an investor’s original shareholding. This means that over time there is the potential for an even greater proportion of total returns to be derived from dividends.

Share price catalyst

Of course, dividend yields historically occupy a relatively narrow range. This means that dividend growth usually equates to share price growth, since a company’s dividend yield is kept close to its historic average. If it becomes too high, increased buying by yield-hungry investors would be likely to lower it back to its mean.

Therefore, it could be argued that as well as providing the majority of total returns in the long run, dividends also have a major impact on capital gains, too. This suggests that investors should focus to a much greater extent on dividends than on capital growth in order to maximise their total returns over a sustained period of time.

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This ‘hot’ summer growth stock has further to go


We’re fast approaching that time of year again when children are nearing the end of the school year and families are looking forward to a well-earned summer break. Of course, one of the more popular family pursuits during the summer holidays is to head off to the beach, be it at home or abroad.


These days, travelling to exotic(!) places such as Benidorm can be cheaper, if not always more cheerful, than Blackpool or Brighton. Families can head off with just a passport, Union Jack shorts, and flip flops without the fear of the meteorological uncertainty that we call the Great British weather. One thing’s for certain – the foreign beach holiday is here to stay.

So who’s cashing in on this phenomenon? Well, the big players such as TUI Travel Group, which owns brands such as Thomson and First Choice Holidays, and Thomas Cook Group which also owns Airtours and Club 18-30, have been making money hand over fist for decades. But more recently, the advent of do-it-yourself online travel agents have been making life a little more difficult for traditional high street operators.

Humble beginnings

One of the newer online operators is On The Beach Group (LSE: OTB). No prizes for guessing what type of holiday it specialises in. This travel firm has graduated from humble beginnings as a start-up business in a terraced house in Macclesfield in 2004, to a full listing on the Main Market of the London Stock Exchange just 11 years later.

Two years on from its September 2015 stock market debut, the Stockport-headquartered business is worth in excess of £500m, and the shares have soared from their 184p IPO price to recent highs of 412p. On The Beach is now one of the UK’s largest online retailers of beach holidays with an approximate 20% market share of the online short haul market. Certainly, the business has made great inroads into its chosen market, but how much further can the share price go?

More traffic

I think a lot further. During the first six months of the current financial year, pre-tax profits for the group rose by an impressive 33.8% to £9.9m, with total revenues up 7.3% to £38.1m, compared to £35.5m for the same period a year earlier. Daily unique visitors to the website increased by 9.5% to 27.5m, with branded and free traffic now accounting for 56.7% of overall traffic.

What I find most impressive is that the percentage of revenue spent on online advertising actually decreased to 40.4% over the same period, with continued growth being delivered by increasing conversion and improving margin while increasing market traffic share.

The share price has performed particularly well since January, rising 50%. But with earnings forecast to rise by 73% over the next two years I think a P/E rating of 17.4 for FY2018 means the shares still offer strong growth at a very reasonable price.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Does sub-$50 oil mean Royal Dutch Shell plc’s dividend will be cut?

A Shell fuel station

At the end of last year, when it looked as if OPEC was making a concerted effort to rein-in oil market oversupply, shares in Royal Dutch Shell (LSE: RDSB) charged to a 52-week high of just under 2,400p. Unfortunately, this rally didn’t last long. By the end of the first quarter, the shares had fallen by nearly 10% and have continued to slide as worries about a new oil glut have continued to grow.

The falling oil price has reignited the argument about the sustainability of Shell’s dividend payout. This debate raged last year among analysts, but management remained committed to the payout, and the company gained some relief when it issued its first-quarter results. Indeed, for Q1 2017, the company produced a profit of $3.8bn on a current cost of supply basis. Group gearing fell to 27.2% from 28% in the quarter before the receipt of about $15bn of proceeds from asset sales, which were not completed at the time the results were issued. 

Falling earnings 

Q1 results convinced investors that Shell’s dividend was secure once again, but in the months following, the price of oil has dropped from an average of $54.61 in the first quarter to $45.33 at the time of writing. 

According to Shell’s Q1 results presentation, a plus or minus $10 per barrel move in the price of oil impacts group earnings by plus or minus $5bn. This indicates that after the recent move in the oil price, Shell could have returned to a lossmaking position.

Abandon ship

Does this mean it’s time to abandon ship in a world of sub-$50 oil? The answer to this question ultimately depends on your outlook for the oil price, but based on Shell’s Q1 performance, I wouldn’t want to make any sudden movements. 

The quarter showed that when oil prices move in Shell’s favour, even by only a few dollars, the company is hugely profitable. Further, management hasn’t yet finished restructuring the group, lowering costs and selling off non-core assets, and further action on this front will only improve the company’s profit margins. 

Shell has demonstrated over the past year that the company can adapt to a world where the price of oil trades below $100 a barrel, and there’s nothing to stop the company adjusting to a lower hurdle. If oil prices never go above $50 again, the company will shape itself to fit this environment. Debt reduction, asset sales, and cost cuts are likely to come before the dividend is reduced, which is great news for investors.

Hold on 

With this being the case, I believe that Shell will remain a FTSE 100 dividend champion for the foreseeable future and income investors can rely on the company’s dividend payout to remain at its current level. After recent declines, shares in Shell currently support a dividend yield of 7.1%, offering the sort of income that’s almost impossible to find elsewhere.

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Rupert Hargreaves owns shares of Royal Dutch Shell B. The Motley Fool UK has recommended Royal Dutch Shell B. 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.

You can achieve financial independence easily by using buckets


Achieving financial independence is everyone’s goal. The dream of quitting the rat race and being able to live off your savings may seem like an unattainable goal to many but in reality, to achieve this, all you need is a little planning.

The key to building wealth is a regular savings plan. If you’re putting away a little every month, over time this savings pot will build up. The best way to ensure that your savings stay untouched, and grow steadily over time is to use a bucket approach.

Using buckets 

Using financial buckets to segregate your wealth is easy way of making sure that your money works as hard as possible. It doesn’t require much effort and you’ll soon reap the rewards.

How you plan your buckets will obviously depend on your current financial situation, savings goals and position in life. But no matter how you divide your wealth, you should be better off for it.

A simple bucket approach would be to divide your wealth between current and long-term savings. Depending on your current financial situation you may believe it is prudent to put aside enough cash to meet three months of spending obligations as protection against unforeseen occurrences. 

With this cash cushion in place, you can devote the rest of your wealth to savings products with a longer horizon, with the intention of locking these funds away. Inside this bucket you may then choose to have two more buckets, one of which carries more risk but a higher potential long-term return such as equities. The other would be low risk but offer a steady return — bonds might be appropriate.

Tricking yourself to save more

The great thing about the bucket approach is that, as well as encouraging saving and making sure that you don’t dip into your savings to meet near-term costs, it provides a psychological benefit. 

Equities have generated a historic return of around 10% per annum, much more than offered by fixed interest. Nonetheless, this higher return comes with increased volatility, which may scare off some savers. But by using buckets there’s no need to fret about volatility.

Research has shown that investors tend to panic when the market falls and sell at any cost, a destructive strategy. However, if you have your near-term cash requirements satisfied in the lower-risk savings buckets described above, the chances of you deciding to sell at the market bottom are greatly reduced as you can afford to wait for equities to recover.

Shares in companies such as Royal Dutch Shell and GlaxoSmithKline may fall significantly during periods of market turbulence but these companies have a long history of producing returns for investors and due to their size, they are unlikely to go out of business any time soon. What’s more, these two companies both support dividend yields that are several percentage points above the income offered by most savings accounts.

The bottom line

Overall, if you want to achieve financial independence, a disciplined approach to saving is required. And the best way to ensure that you get the most from your money is to separate your funds into different buckets, with different levels of risk and reward based on your own financial circumstances. Job done.

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Rupert Hargreaves owns shares of GlaxoSmithKline and Royal Dutch Shell B. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Royal Dutch Shell B. 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.