Growing and managing your wealth
At Hastings Investment Management, we understand that money is certainly not everything in life, and there are many things that are more important.
Having said this, we believe it is prudent to be a good steward of the resources you have.
All of us have aspirations in life. It may be a certain lifestyle; your children's education; helping your children onto the property ladder; travel and holidays; or a comfortable and enjoyable retirement.
Whatever your hopes and plans, it is likely to best be achieved with planning and a clear course of action.
Our world is changing. Our economy is dynamic and fluid, and dealing with this is not plain sailing. Inflation comes and goes, but it can never be dismissed. Interest rates vary too and are difficult to predict. Lastly, we are all living longer in general. One of the challenges for the future is likely to be ensuring that our money lasts as long as we do.
It is also important to grow your wealth as tax-efficiently as possible. There are several government-approved schemes available that, if managed well, can make a dramatic difference to your financial outcome.
The points to consider
1. Understanding risk and reward
Most investments carry some form of risk. What makes it more difficult is that everyone has a different perception of risk, and what risk they are prepared to take with all or part of their wealth.
It is generally true in investment terms that taking more risk offers the potential of greater gain, particularly over the longer term. However, for some people, if they have accumulated wealth during their working life, they can be very risk-averse and will want to ensure that they don't face uncertain returns.
Our role is to fully understand your attitude to risk and create portfolios for you that meet your requirements and expectations.
The phrase 'don't put all your eggs in one basket' is particularly true of planned investment portfolios. There are a wide range of asset classes available to today's investor. The most common ones include bank deposits, fixed interest securities, property, shares and a very wide range of different investment funds. Different asset classes will perform differently at different times and are likely to have different volatility, particularly over the shorter term.
To obtain steady returns that meet your personal risk profile, it is generally best to have a blended mix of asset classes that protect you from undue ups and downs.
3. Ongoing monitoring
The world doesn't stand still, and our own personal circumstances change over time.
So, having identified a risk profile that suits you (and an asset mix that reflects this), it is then essential to review this over time.
The world does change, and asset classes that start off as relatively low risk can become much higher risk over time.
Similarly, the changing life stages that we go through will also change our attitudes, whether it is providing for our children or becoming more cautious with our wealth in retirement.
No one likes paying more tax than they need to, and the Government provide several incentives to encourage us to save. These very legitimate schemes give investors the opportunity to save on Income Tax, Capital Gains Tax and Inheritance Tax.
For people who live in the Edinburgh area, Inheritance Tax is now a major issue, driven by the rise in property prices. With the Inheritance Tax threshold frozen at £325,000, all assets above this level stand the risk of being taxed at 40% – very painful for your heirs! Yet Inheritance Tax has been called a 'voluntary tax', and with the right planning, much of it can be legitimately avoided.
Investments can be complex, particularly where tax is concerned or when you want to make changes to your portfolio. If things are missed, there can be tax penalties and the paperwork can be difficult. Yet with the right administration, these problems can be avoided, and you can have an overview of your portfolio whenever you want it.