Investments
It is often said that the most important aspect of financial
planning is to get your asset allocation strategy right. After
all, when one asset class is appreciating in value, another
might be falling, so spreading your investments can make good
sense.
This is true; but it only really works when put into the
context of the time-scales over which investments are to be
held.
For example, investing in shares when access to the money
is required is unlikely to appeal because values over the
short term are volatile and trading costs take time to be
exceeded by capital growth. Conversely, investing in cash
over the longer term is unlikely to offer the same potential
for long-term growth as equities or property. And, again,
having all your investments in property when you come to retire
could make it difficult to realise assets just when you want
them, because it can take time to sell shares.
So investment success is all about timing as well as balancing
asset classes. It is also, of course, essential to take account
of the individual investor’s attitude towards different
types of investment risk, such as:
- Overall underperformance
– the risk that values will fail to keep up with inflation;
- Relative underperformance
– the risk that values will perform worse than other
similar investments;
- Absolute underperformance
– the risk that part or all of the original investment
will be lost; or
- Volatility –
the risk that values will fall suddenly just when access
to the money is required.
We are highly experienced in helping our clients to identify
the right asset balance to suit their requirements and then
go on to recommend specific investment strategies. We are
not averse to “thinking outside the box” and will
even review the use of cash deposit accounts to ensure that
the facilities used offer the best possible interest rates
(as opposed to the interest rates paid by high street banks).
We are also able to recommend on the tax effectiveness of
different investment options, including using Individual Savings
Accounts, National Savings and Pensions as part of an integrated
investment strategy, in order to minimise exposure to income
and capital gains tax. |
