Investing a lump sum and making regular savings

The basis of any successful investment strategy is a clear understanding of your objectives, the associated timescales and what you are prepared to undergo in order to achieve those goals. In order to do this you need to consider various issues:

Are you saving for something specific or just saving for a rainy day?

We all try to put something away to cover emergencies and to save for those special little extras but if you are saving for something specific for example a house deposit or for your children’s university fees, does it make a difference? Should you use different types of saving for different objectives? The answer is usually yes and our advisors are here to help you identify which goals need which type of saving or investing

What are the effects of inflation?

If you are saving for something in the future it can be very difficult to identify the impact of inflation on your calculations, but to fail to do so can mean that you fall way short of your target. We are here to help you understand the effects of inflation and to design strategies that overcome it.

What are the different types of risk and how much risk am I happy to take?

Should you always save in a deposit account or should you consider taking a little more risk to get a potentially better reward?

How much risk is the right amount?

Is there such a thing as a risk free investment?

We are often asked these questions but when people talk about risk they are usually describing volatility or investment risk. This certainly is important and we will spend quite a lot of time with you identifying your thoughts on this understanding the right level of investment risk for you but there are other types of risk you will need to consider too. The risk of illness or dying and its impact on your family; the risk of interest rates going up or down or the risk of losing pace with inflation.

We use risk profiling tools which helps us identify your sensitivity to volatility and your ability to withstand investment losses. This is used as the basis of a discussion about investment risk, volatility and losses. We will discuss all of the appropriate issues with you so that you will consider all of the associated risks before making any decisions. We will then help you manage risk on an ongoing basis

Which types of assets should I invest in?

The most common way of controlling investment risk is by diversification – not putting all of your eggs in one basket. By holding a wide range of different types of assets, all of whom behave in different ways at different times you are reducing the impact that any one type of asset might have. The amount of money you allocate to each type of asset is probably the single most important decision that you will make when designing a portfolio. It is academically accepted that asset allocation as it is known, has the single biggest impact on both the volatility and ultimate return of an investment.

Deciding which assets are right for you is a difficult task and we are here to guide you through the principles of asset allocation.

What is Active or Passive investing?

There are two different ways to invest money known as either Active or Passive investing.

Active investing uses a fund manager who invests on behalf of you. You pay him and therefore expect him to “outperform the market” by having an understanding of the particular sector in which he works. You expect him to add value.

Passive investing involves no human fund manager but instead a computer programme that “tracks” an underlying index for example the FTSE Allshare. This means that you cannot outperform the market but simply replicate it.

There are pros and cons to both approach and we are here to help you understand which is the right one for you or if indeed a blended approach might be the most suitable strategy.

How do we look after your money?

Once we have decided on the right strategy for you we can invest your money in one of four ways.

1. We can devise a bespoke package that is tailored to your individual requirements and needs. This approach will use individual funds and every one is researched by us. This approach is usually the most expensive as everything is done on an individual basis. These investments are usually carried out via a platform.
2. For those who feel that the increased costs outweigh the benefits associated with running a portfolio on such a basis, we offer our range of Preferred Portfolios. These portfolios are run for us by various fund groups, who provide a more standardised approach for groups of our like minded clients. This sharing of costs means this is a more affordable service. These investments are also usually carried out via a platform
3. We can invest monies via the traditional life insurance and pension companies if you are looking for the type of benefit that only they can offer. This service costs somewhere between the two other services and is priced accordingly.
4. We can instruct a third party Discretionary Fund Manager (DFM) to invest your money on your behalf. They will agree a strategy with you and make all the investment decisions on your behalf to achieve that strategy. We will liase with them and ensure that they follow the mandate that you have given them. We will undertake all of the financial planning issues; the DFM only deals with the actual investment of your monies not the tax wrappers that surround them.

The value of your investment can go down as well as up and you may get back less than you have invested.