Diversification of your investments is crucial to reduce losses and preserve capital during stock market uncertainty.
Historically, investing in the stock market has afforded much greater potential for growth than saving in but this all very much depends on the level of investment risk you are comfortable with. Many people get excited by the idea of making quick, easy returns but I feel there would be more who feel uneasy at the thought of losing money if the stock market were to fall or even worse crash!
The way in which we manage our client's expectations to investment risk, as well as their desired returns, is quite a balancing act. Whether they are investing for income or capital growth we are able to find a solution that best their needs. This is something that only a qualified professional should be trusted to think about.
How we minimise the risks
Firstly… we are totally ‘independent’ so we have complete access to the ‘whole of market’ when it comes to the investment solutions we recommend to our clients. We are able to select Investment funds and managers from around the world that are free to purchase shares across multiple companies that a lot of pre-analysis and due diligence has already taken place. These are further diversified not only by geographical region but also by industry sector.
It's not all stocks and shares
Investing is not just about the equity market. Above-inflation returns can be achieved by investing across other asset classes, such as property, government and corporate debt and commodities rather than holding excessive amounts in cash.
History has shown us that each year different assets classes will perform differently with nobody ever being truly sure which will perform best. By carefully selecting an asset allocation that matches your pre-assessed risk level will ensure that you not only achieve your desired medium to long-term returns but more importantly that we protect your capital or income against any sudden downturn in the market.
That's not all...
Staggering your investments can reduce your exposure to falling markets. Investing at regular intervals may mean you buy some assets when prices are high, but also affords the opportunity to purchase when prices are low. The technical term for this is pound cost averaging, but in simple terms it means that at some point of entry to the recommended asset allocation should be at an attractive, reduced price, meaning the possibility of a loss in the value of your investment is much reduced.
How can we help...
Using all the methods above is an integral part of how we build an investment portfolio for our clients at SMC. Whether that is into an ISA, a Pension or Investment Bond, our recommended investment wrapper will be as much about ensuring tax efficiency as it is in achieving the best possible returns for the least amount of risk.
Do not hesitate to get in contact with one of our advisers should this be something you would like to discuss further.