I have waited 30 years to use this virtually forgotten expression. My father used to say 'he wants cake and th’ ha’penny' to describe someone who wanted everything at the best possible price. Today I think it could be argued there is an investment opportunity which encapsulates this saying perfectly.

With investments you usually have to choose whether you want the potential for capital growth or a high income. It is rare that the high income element also offers the potential for some growth. I believe fixed interest and other high yielding investments could currently offer just that.

Of course, there are no guarantees. The reason these investments have a high yield is because a glut of sellers have driven the price down. The question you have to ask is, if people are selling why would it make sense to buy them?

“Tha wants cake and the ha’penny -
An expression attributed to the early part of the 20th century when cakes did cost a ha’penny (0.21p). Its origins are apparently in Lancashire. It indicated someone who wanted something ‘nice’ but didn’t want to pay full price for it.”

In my experience, in most investment markets things always tend to go too far. Euphoria can drive a market too high and fear can drive it too low. The fear of defaults has been partly the cause of driving high yield investments lower. However the main reason for low prices is that institutions have been forced to sell assets at knock down prices in order to bolster the cash in their balance sheets. We believe that prices have fallen too far. The Chancellor has problems - inflation, house prices, economic slowdown and financial institutions which are reluctant to lend to anyone.

Economic wisdom says you can solve one, two or three of these problems but you can't solve all four. Putting up interest rates, for instance, would check inflation but it might just turn an economic slowdown into a recession. Most pundits believe cutting interest rates, and alleviating the other three problems, is more important than worrying about inflation.

Therefore it will be interesting to see whether the Bank of England is eventually reinstructed on their mandate for containing inflation and given more freedom to cut rates.

What does this mean?

We believe there is a window of opportunity. You can benefit from yields at these levels and if interest rates are brought down there is also some potential for capital growth. The cake and the ha’penny.

Hargreaves Lansdown Investment Times contains information and ideas to help you manage your investments. You can request a free sample copy here. 

By Peter Hargreaves, Chief Executive of Hargreaves Lansdown

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