3: Investments – their role in your financial plan and optimising returns

There is always going to be a place for cash in your short- and medium-term saving plans, but if you intend to save over the long term (typically 5+ years) then choosing to invest could be the best way to shield your money from inflation’s damaging effects and make your savings work as hard as possible.

Investment markets suffer almost cyclical disruptions which, understandably, can act as a deterrent. However, experiencing volatility is an inevitable part of an investment journey and by adopting certain investment principles you can manage risk, foster confidence and get the best chance of achieving your goals.

1. What’s your investor style?

To create a balanced investment portfolio, it is important to use a blend of investment styles:

• Value investors try to find stocks trading for less than their intrinsic value, believing the market will re-evaluate these companies in the future and their price will rise.
• Quality investors look for companies that do well in good times and bad. They believe that these companies are well placed to help shield against volatile markets.
• Growth investors look for companies that are expected to growth faster than the market and with it, their stock price.

2. Head v heart

When markets are moving quickly, rash decisions driven by emotion rather than logic can threaten your financial health. It is essential during times of market volatility to retain a long-term perspective and not to make impulsive or irrational decisions.

3. Diversification dilemmas

The future is uncertain and diversification is our best protection against this. Having a number of different funds, each with a different focus, whether in terms of industry/sector or geographical/asset class allocation, can provide smoother and more consistent returns, avoid the risk of missing potential performance from assets you might otherwise not own and spread exposure across correlated and uncorrelated assets. Moreover, thinking we can make accurate predictions leads to less diversification, more risk and, almost inevitably, worse long-term outcomes. It is a relatively simple concept – not keeping all your eggs in one basket – yet can be difficult to do well.

Next steps…

There are thousands of stocks to pick from in the UK alone, so creating an investment portfolio with the best potential for growth, minimal volatility and at a risk level that suits you, is no easy task.

At Westgate, we take a team approach. Our advisers will help you craft a bespoke financial plan and we will work with you to keep this on track – amid all the investment noise. Our consulting fund managers make the stock-picking decisions and our expert investment management team is responsible for selecting, monitoring and changing (as necessary) the global fund managers.

So, ask yourself, do you:

• know if and how your current portfolios are diversified;
• know what level of risk you are taking;
• know when your investment portfolio was last reviewed; and
• have an adviser to consult with?

If not, now is the time to review your plans. For a no obligation financial health check, contact Westgate today:

• Tel: 01962 353153
• Email: enquiries-westgate@sjpp.co.uk
• Web: www.westgatewealth.co.uk/specialist-advice/the-bar