Five top tips for smarter investment

Published on 3 October 2018

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Every investment decision should be taken with care and consideration of all of the facts. But equally important is the need to give thought to your overall investment strategy and what you want to achieve.

To help, our team of experienced financial planners have created five top tips to guide smarter investment.

Tip number one: Have a clear objective

All investment decisions should be made with a clear idea of what it is you are trying to achieve. Are you looking to grow your money or produce income? How long are you prepared to commit to your investment for? How much flexibility to meet changing or unforeseen financial needs do you need? What level of return are you looking for? These are just some of the questions you will need to answer.

Tip number two: Management of risk

This is perhaps the most important point for many investors and will naturally change depending on an individual’s age and circumstances. Concentrating capital in equities may offer higher potential returns for long-term investors, however those approaching retirement, for example, are likely to consider less risky investments.

It is important that investors consider their capacity to shoulder any potential loss. Investors need to understand how a downturn or capital loss with affect their position and adopt an appropriate risk profile accordingly.

Tip number three: Diversification of risk

One principle of managing risk is to hold a diverse investment portfolio. Higher risk investments, such as shares are associated with higher long-term returns, but it would be inappropriate for someone with a short investment term or with little appetite or ability to shoulder a loss to choose this type of investment. Your advisers should guide you in the right direction.

Tip number four: Consider the wider environment

It is important to look to and understand how changes in the wider economic and political environment, such as Brexit, rising interest rates and market corrections may affect an investment portfolio. Short-term market movements are likely to have a greater impact on those looking to retire or access their investments soon, but perhaps less so for those with long-term objectives who can ride out short-term volatility.

Tip number five: Review regularly

All investments should be reviewed regularly to monitor their performance and continued suitability. Changes in your personal circumstances and objectives, legislation and tax rules and the wider political and economic environment will all impact on the continued suitability of your investments to meet your personal requirements.

The good news is that you are not expected to make these decisions entirely on your own. Good independent investment advisers will help you answer these questions and keep these top tips at the front of mind. If your investment advisers do not address these points, return to tip number five and make sure your review your advisers as well.

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This material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation. Kreston Reeves Financial Planning Limited (Registered in England and Wales, registered office: 37 St Margaret’s Street, Canterbury CT1 2TU, number 3852054) are authorised and regulated by the Financial Conduct Authority.

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