The process for choosing investments is a key part of financial planning. It is important that your financial aims and attitudes to risk are established at the outset. What are you trying to achieve from your investments? Are you looking for income, for growth or to achieve a specific target level of capital for some point in the future?
The next stage is to establish the capacity and tolerance to risk. Only by speaking to our expert investment managers can you really understand the nature and the level of risk your investments actually mean to you and your financial situation.
Investment risk and allocation
Risk is at the heart of many investment decisions and it is typically at the starting point of the investment planning process. There could be several types of risk in any investment. Helping you to understand the risks is a key responsibility of your investment adviser. The asset allocation decision is especially important in the management of risk.
Diversifying across different asset classes, such as UK shares, foreign shares, fixed-interest securities, property and commodities, can reduce your investment portfolio’s volatility. What is bad news for one asset class might be good news for another.
Once the asset allocation has been set, the next decision is how to invest in the selected asset classes. For most private investors, that will mean using collective funds, such as unit trusts and open-ended investment companies (OEICs). The direct purchase of assets rarely makes sense because of the costs involved and/or the difficulty of achieving an adequate spread within the asset class.
The construction and management of fund-based investment portfolios is now largely undertaken using investment platforms. At its simplest, an investment platform provides a means of assembling and administering a spread of different funds from a range of investment managers, which can be held in a variety of tax structures.
The number of platform providers has grown in the past ten years, although there have also been some disappearances. Your adviser will consider a range of factors when recommending a platform to you, including:
- The choice of funds and investment managers – generally the more the better.
- The range of tax structures available. The provider’s record for administrative efficiency.
- The level of fees charged and their collection method. The financial strength of the platform provider.
Acumen can also advise you on the best way to achieve your aims and help to insure your investments realise the outcomes you want for your children. Contact us today for more information.
Reducing taxation on Investments
The taxation on investments has never been a simple matter. Over the years it has gained in complexity due to an increasingly elaborate tax system and differing taxation policies across governments.
Acumen will help to reduce the taxation on your investments. There are many ways of doing this, such as:
- Selecting the most appropriate ‘tax wrapper’ for your chosen investment.
- Advising you on the most effective tax strategies for drawing income/capital.
- Assisting you with calculations for your tax return.
- Always being on top of new legislation and tax planning opportunities.
Acumen offers comprehensive investment advice and investment planning including asset allocation, appropriate investment selection, risk mitigation, inheritance tax mitigation and educational cost planning.
Investments and cash deposits are very different. Deposits in cash are typically used for more immediate needs, “rainy day money” or an emergency fund. Investments provide us with the prospect of medium to long-term growth in real terms by beating inflation. Proper use of the various different “wrappers” can improve the tax treatment and when combined with high quality, well-researched investments it allows us to create wealth.