I get asked quite a lot at the moment about whether to buy, sell or to make changes to investments, says Rob Wood, Independent Financial Planner. Making these decisions can be very difficult, especially in unpredictable times like these.
The simple answer to my clients is that investments should be thought of as a long-term savings plan, not just a quick cash cow. But, say my clients, which assets do I buy? Should I focus on one thing (like gold) or one asset class (like property) or should I spread my portfolio across a mix of investments? The answer comes down to risk.
Risk is a vital consideration to consider when planning your investment strategy. Investing your money on the stock market or within any other financial product or vehicle without understanding the risks involved is a recipe for disaster.
In order to try and control the level of risk being taken, there are two key factors to consider.
The first is what to understand what assets are being purchased and how risky they themselves are, and the second is to maintain a well-diversified portfolio held across a number of sectors and geographical locations in order to manage and spread risk where possible.
Understanding the investment mix and getting this right is a key component to having a successful investment in years to come, as well as adjusting this mix as and when required. This is especially important in uncertain times like those we find ourselves in right now.
At present, the UK finds itself in a recession, but the short-term impact of the virus was always likely to push growth into a recessive state. It’s also important to remember that recession is part of the investment cycle and tends to occur every 10-15 years. The upside of the current situation is that for investors this may be an opportunity for greater potential in the future as recovery starts to take hold. Using this time to manoeuvre and adjust your portfolio to take advantage of these opportunities can result in much better outcomes in the longer term.
Having a well-diversified portfolio means that your savings will benefit from growth across a range of areas, whilst reducing your overall risk exposure. There is risk in everything we do and making educated and well thought out decisions are what keep the majority of us safe. Why wouldn’t you take the same approach with your savings?
If you are considering investing into the markets or thinking about making changes to your existing investment portfolio, please call Scrutton Bland for some impartial holistic advice to see how best to move forward.