Investing, building and Protecting your Capital
Control is everything when you are investing, building and managing your wealth, if you are not in control of your finances and in particular your investments, you will have no idea what is happening now and what, if anything, to do about it. That said I don’t want to encourage you to become obsessive about money and investments, you have to find a balance and that is done more easily when you work with a professional who does the worrying for you and helps you to be in a comfortable position, in control.
What’s so important about being in control of your investments?
Many investment and asset managers would tell you not to worry, just invest your money, go away and come back some time in the future, a long time, and your money will have grown. That’s the idea of passive funds, index trackers etc, but what if when you come back global events have led to a significant correction in world markets?
If your long-term horizon had taken you to late September 2001 for example, your plans may have been totally ruined by the dotcom crash, by which point the FTSE 100 had fallen from a high of 6950 to a low of 4219, wiping 39.29% from the value of your investments. Stay calm the asset gatherers said, its time in the market that matters – but what if you don’t have the time or don’t want to wait?
The FTSE 100 didn’t hit 6950 again until March 2015 almost 14 years later!
If you had sat tight, the market did rise again over the next 7 years, but in October 2008, the FT100 index fell again to a low of 3665, causing you to sit nursing your losses again until things got back to the 2001 levels – another 7 years later in 2015.
You need a plan
Successful investing is all about having a plan, why are you saving and investing? How much money do you want to build up? When might you need some or all of the money? Does your money need to provide you with an income now or in the near future? All these things need to be considered.
Here are some of the reasons we have been told by our clients that they save and invest:
- I want to be responsible with the money and make it grow – no point in it sitting there doing nothing.
- I want to build as big a fund as possible for when I retire
- I want to build my funds so that I can have financial freedom in the future.
- I want to build my funds so that I can help my children when they get older.
- I want to take an income from my investments when I retire or retire early.
Even though you have a plan
Investing is not simple and plans can come unstuck very quickly and easily. Economies and investment markets have run in cycles for over 200 years, each cycle has within it companies whose share price performs better than others, there are times to be defensive, times to be more adventurous and times to be aggressive with your investing strategies.
Different sectors of the markets do better in some times than others. For example, China is struggling at the moment, the Tech sector in the US has been excellent this year, primarily driven by AI. What about India? Vietnam, Europe or the UK?
Being in the wrong place at the wrong time can hurt your investment performance and lengthen your time horizons so it’s important to start off in the right place and be nimble enough to move your money around when necessary to be in harmony with the prevailing Economic and investment market cycle.
For example, if you had been predominantly invested in the UK Smaller company sector your investment could have grown by 75.3% over the last 10 years. But if you had been invested in the North American sector, your investment would have grown by 233% in the same 10 year period – over 3 times more! (Source: Sharepad)
So being in control of your money is vital so that you are on the right side of the market, and if you don’t want to do all this yourself, then you need professional help.
How much do you need to achieve these objectives?
The target amount will be different for everyone, but here’s an example: If you want to retire at 58 and let’s assume you live to 84 (26 years) and you want income of £30,000 a year from your investments to enhance your pension income, you want 26 x £30,000 = £780,000 IF you don’t want to use your original capital.
Pulling it all together
Whatever your plan for your Investments, you have to take control and monitor and adjust your plans as necessary along the way. There is a lot to think about in that simple task of taking control and we are here to help you with that.
We will manage your investments, meet with you regularly throughout the year, provide you with the reports and tax information you need so that you stay on the right track to achieve your investing objectives.
If you are starting out investing or have a portfolio already, talk to us about making your money work for you.