Hugh Lambert 1 Comment

When investing, whether in a regular monthly investment or a lump sum investment, the following are some principles to keep in mind when doing so:

Diversify

Spread out your investment across many different types of investment classes – shares, property, alternatives (commodities, crypto etc). You will avoid being overly exposed to one particular asset – as an example, property or bank shares during the financial crisis from 2008 to 2011.

Keep Specialist Investments To 10%

Keep specialist investments to 10% or less of your overall fund/portfolio. In keeping with diversification, it means you are avoiding taking the entire drop in an asset valuation such as Cryptocurrency over the last number of weeks (May/June 2021).

Long Term View

Time is an asset in itself when investing. The longer the time frame the greater the chance of positive returns. Investing in shares for 10 years or more gives you a 94% probability of making positive returns (https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/).

Savings and Investment Plans are only suitable for a 5 year plus time frame. If you think you will need to access money sooner then you would be better off putting on deposit. The returns are minimal but your money is secure and accessible.

Take Some Measured Risk

Put simply, you have to invest in growth assets for a medium to long period of time. This means shares, property, commodities and possibly Cryptocurrency. Other options are bonds and cash but the return just isn’t there on these investments at present. Over the long term US equities have returned 8% per annum (https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp) and you can expect commercial property to return approx. 6% when the market reverts to a more stable condition and employees return to work (estimated 2% inflation plus 4% rental income). Returns on bonds and cash are virtually zero now (June 2021).

Most managed funds have what is called an ESMA (European Securities and Markets Authority) rating which has expected volatility level (the movement in the value of the fund) so you can then assess what you are comfortable with.

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