The Christmas and New Year period traditionally represents a time when we reflect on the year that has almost passed and look ahead to the coming twelve months. Often it is a time to make plans for the future – or at the very least, resolve to ring some changes.
When it comes to financial matters, you very possibly won’t feel inclined to spend a lot of time thinking about your current investment portfolio over the festive season but, then again, the period between 23 and January 2 is often quiet and offers a good time think.As you look forward to 2019 – it may be a good time to reflect on if and how your life is changing and what those changes might mean for your investment strategy.
Regardless of the season, there are some very good reasons why we should all review our finances at least once a year and preferably more often.
For one thing, it’s a less than ideal world. One in which some asset classes perform better than others, and within each class, you’ll probably find specific investments that have not lived up to expectations. In that respect, one purpose of a review is to identify the investments that are doing well and those that are distinctly under par. You can then make the appropriate changes. And in the case of investments that have performed particularly well, there may be opportunities to take profits and reinvest them elsewhere. It’s an ongoing process.
Big Life Events
That’s assuming that everything else has stayed the same in terms of your income/growth goals and your appetite for risk. In broad terms, the investment goals of, say, a twenty-five year old single man are woman to those of the same individual ten, twenty of forty years later, when factors such as marriage, the arrival of children and – sadly – divorce may come into play.
And The Unexpected
Those are some of the big life events that typically require a rethink of investment. But there are other events – sometimes unexpected – that may feed into your investment plan. For instance, it may be that you come into a large sum of money – perhaps by selling a business or property, or through an inheritance.
The Big Decisions
Sometimes a big decision comes into play – for instance, if 2018 was the year in which you decided to branch out on your own by starting your own business, rather than working for or partnering with someone else. That kind of move can raise all sorts of questions. How will you fund the planned company? What should you do to protect you and your family from hardship should the venture fail? How will you live when the company is at the pre-revenue stage? What do you need in terms of collateral to secure bank funding?
There are other ways in which a working life can change. An overseas posting – and exposure to opportunities elsewhere in the world – could have a direct impact on your investment plans and perhaps also your approach to tax planning. A change of job may have an impact too. Move from your present company to one offering a much more generous salary and incentive package and there will be more scope for investment. Downshifting to a job that pays less but offers more satisfaction would create a different dynamic.
There are, of course, events that are outside your control – and in particular economic and industry trends and cycles. The great crash of 2007/8 now seems like a long time ago, but the near collapse of the banking system and the recession that followed required a response from investors seeking to preserve their wealth. Not all events are so dramatic, of course, but it is always worth reviewing the trends within asset classes on a regular basis. What is the outlook for commercial or residential property? What is the direction of travel for bond yields?
In other words, there are a lot of moving parts to take into consideration and that’s why any period of reflection over the Christmas holiday (or at any time during the year) should be followed up with regular and proactive financial reviews. You may want to rebalance the portfolio to prioritise income over growth. There could be a requirement to free up some cash, rather than having it sitting tied up for a long period of time. Or indeed, you may be seeking an investment with strong returns that only involves cash being committed for a year or two.
Any review should preferably in the company of a wealth manager who understands your changing requirements and how they can be reflected in an investment strategy.
And it’s important that your wealth manager offers a genuinely bespoke and personal service. One that reflects you as an individual rather than as someone who, say, slots neatly into a demographic group. The Route – City wealth club’s approach is to treat those we work with as Members rather than clients. And that’s an important distinction. The Route offers a range of tax planning services and access to investment opportunities tailored to the requirements of each individual Members. The aim of to provide a bespoke service with regular reviews to ensure that the investments deliver on the objectives of the individual. As your life changes and the world moves, so should your investment strategy.
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