Do you know how much risk you are prepared to tolerate when you invest? This is the question that lies at the heart of investment planning – and very often the discussions about risk take the longest. The basic investment choice is between the following asset classes: cash; fixed interest securities, equities and property.
These are the building blocks of investment portfolios. Your risk profile – how much risk you can and should be prepared to take on – will help determine the appropriate mix of these basic components in your portfolio, usually called the asset allocation. There are several other factors to consider such as how investments are taxed, and the choice of fund managers and institutions, which can make a substantial difference to your returns, but asset allocation is almost certainly the key decision.
Investment planning and asset allocation
Asset allocation is often thought of as the key to achieving investments returns: an average fund in the best-performing sector is frequently a better choice that the best fund in an average-performing sector.
Investing for income when you retire
There comes a time when you stop working for your money and put your money to work for you. For most people, that is retirement. The decisions you make then could have repercussions for the rest of your life, and recently there have been some major changes to the choices you can make with your pensions.
Investing for children
Most parents want to help their children financially, whether it is making sure there is enough money for their education or helping them to buy a property. An early objective may well be to help children understand the value and importance of money. Tax will be a major factor to consider, as will the risks of giving children too much too soon. It is therefore important for parents and others to appreciate the basic tax and legal rules and also some of the investment products that are suitable for their children.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
Past performance is not a guide to future performance. The value of investments and income from them can go down as well as up, and you may not get back the original amount invested.
Levels and basis of, and reliefs from, taxation are subject to change and depend on your individual circumstances.
This publication is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The Financial Conduct Authority (FCA) does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme. This publication represents our understanding of law and HM Revenue & Customs practice as at 31 October 2016.