Investments

People generally invest in order to provide themselves and their families with a better standard of living. In order to do so, it is necessary to put money aside now in a manner that is most likely to produce results later on. But all forms of investment carry the risk that investment values will fall, or, at best fail to keep pace with inflation.

That is why we invariably recommend to our clients that they follow an asset allocation strategy. In simple terms this means not putting all their eggs in one basket, but matching where money is invested to their needs and circumstances, reflecting their attitude to risk.

In other words, if you are putting something aside for a rainy day, then investing in property or equities may not be a good idea, because it can be difficult to get access to the former and the latter is highly volatile. On the other hand, putting money into a bank account may be a good way of ensuring that it loses value, since interest rates seldom out-perform inflation, once tax is taken into account. So this may not be a good way of saving for the longer term.

Our investment philosophy looks at each client’s individual goals and then builds an investment strategy that allocates money into different asset classes (such as equities, deposits, property and so on), each appropriate to the purpose and time scale involved.

Of course, perspectives – and needs – change over time and we undertake regular reviews with our clients with the aim of ensuring that, as requirements change, so does the balance of investments held.

One of the benefits of following an asset allocation strategy is that not all investments move in the same direction at the same time – or at the same speed. For example, when interest rates rise, equity values might weaken, as people believe they can obtain a better return on their money using deposits or gilts. Similarly, equity markets in the Far East may fall while those in the UK rise, and vice versa.

Of course, by spreading risk, investors inevitably miss out on the largest rises in any one sector, but they will equally miss out on the largest falls in another. If one could tell in advance which markets would rise and fall, he or she might invest serially in each rising market and sell before it starts to fall. In practice this is impossible, so diversifying investment classes makes sense.

THE VALUE OF YOUR INVESTMENT CAN GO DOWN AS WELL AS UP AND YOU MAY NOT GET BACK THE FULL AMOUNT INVESTED. LEVELS AND BASES OF AND RELIEFS FROM TAXATION ARE SUBJECT TO CHANGE AND THEIR VALUE DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF THE INVESTOR.

The Financial Services Authority does not regulate taxation advice and deposit accounts.