Financial thriving, not just surviving
Whenever there are financial headwinds, people look for ways to protect their savings. However, some common survival strategies tend to be counterproductive. Below, Andrew Mackintosh-Walker, Managing Director at Close Brothers Asset Management, argues that many people who are solely focused on surviving, might overlook strategies that would help them thrive. The political climate has created a sense of paralysis, as people hold off making financial decisions. One unwelcome consequence is that many people have a large proportion of their assets in cash while interest rates are low. Meanwhile, inflation continues to erode the value of cash savings. Here are four strategies investors can put in place to provide firm foundations for their wealth:
1 Invest for the long term
Instead of waiting for perfect conditions, it pays off to invest for the long term.
Since 1988, there has only been one year – 2017 – when markets rose every month. In every other year, markets have fluctuated. It is also important to ride out the storms within fluctuating markets.
2 Ensure a good cash flow
Look at all of your sources of income and think about your assets holistically. Should you take income from your SIPP or from your ISA or other investment pots? It’s important to ensure a good flow of income and consider all tax efficiencies. Without a well-planned cash flow, you might have to sell your investments at the bottom of the market, which would be detrimental to your wealth.
3 Diversify your assets
“Diversification” is the art of not putting all your eggs in one basket. Instead, it’s wise to invest your savings across a number of different asset classes to lower your overall risk. They say, “diversification is the only free lunch in finance,” and there’s some truth to that.
By diversifying your investment across a number of asset classes – such as shares, bonds, alternative investments, and even some cash – you can lower your investment risk without greatly compromising your returns.
4 Take a global approach to investing
Brexit may make you worry about investing but it’s worth remembering that the UK only makes up some 6% of the global market. Worldwide, there are many investment themes that will continue to deliver returns for investors. It’s crucial to select great companies that can tap into these themes. Close Brothers Asset Management look to adopt these strategies to help clients thrive, and not just survive. Your capital is at risk. Investments can go down as well as up.