Chris Bourne is a Senior Consultant at leading Midlands based Independent Financial Advisers, PIA Wealth Management. He specialises in all aspects of wealth and retirement planning, with specific expertise in investments, pensions and taxation.
As we approach the midway point of the year, I am reflecting on what has been a generally positive year for investments (although not completely plain sailing!) and I ask myself what will the coming weeks and months bring?
I don’t know the answer to my question and I don’t think there is a person on earth who can honestly say that they do, so how do you navigate uncertainty? The only answer is ‘diversification’.
We can all see what has happened in the past and try to make guesses at what is coming next – some people are better at this than others, but no one gets it right every time. Commentators can tell you about the events that unfolded last week and how these impacted on different assets.
They may even be able to give some insight into what opportunities these events ‘might’ present, but is this scant information enough for you to go out and choose appropriate investments on your own? In this increasingly small world, where economies are interlinked more so than ever before and the flow of news and information can turn things on a six-pence, trying to make your own decisions on where to invest is fraught with danger.
A good portfolio should blend together different assets, sectors, geographies, investment managers and management styles in order to reduce risk. Risk is essential to get a real inflation beating return on your money, but risk can be minimised by not putting all your eggs in one basket.
In this low interest rate environment, it won’t do to leave large amounts of money sitting on deposit – its real value will be eroded over time. Even when interest rates start to rise, you can be sure they won’t rise quickly, and it is unlikely that bank and building society returns will be adequate for probably another five or ten years.
Careful advice is essential, not only to provide guidance on investment strategies, but on which vehicles to invest in. With so many positive changes having taken place to pensions legislation this year, making contributions for your retirement even later in your working life is now very attractive.
Since April 6 this year there are no longer any restrictions on how you withdraw money from your pension; as long as you are 55 or above a pension will be as accessible as any other investment. As I regularly say to my clients, there is no other investment vehicle readily available to almost every person in the UK that will give you 20% growth on your investment immediately.
Now is the time to take advantage of this very supportive system.
Chris Bourne
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