It is difficult for any investor to see their investments go up in value one day and down the next. In the worst of times, it is easy to forget that market declines — even steep ones — have been a natural part of the global and economic cycle.
Trying to second-guess how events will impact on markets – or even attempting to make a bet on them – rarely pays off. Instead, investors who focus on long-term horizons – at least five to ten years – have historically fared much better.
It is important not to act based on emotion or based on one single event without obtaining professional financial advice. If you have concerns you can reassess your investment goals, time horizon, risk tolerance and financial situation to make sure your investments and asset allocation are still appropriate. Even when markets fall, your investment goals are unlikely to have changed.
Without a plan, investors are prone to making knee-jerk reactions when there are swings in the market. A well-thought-out investment strategy provides the guidance needed to help you stay on track when inevitable market fluctuation occurs. It can also point you towards the types of investments that best align with your financial goals.
Investors are continually faced with ever-changing market conditions, an often-overwhelming amount of information from the media and an increasing number of investment choices. It is not surprising that the world of investing can seem complex.
By maintaining a clear purpose for your investment strategy, you help yourself stay on track and confidently navigate the ups and downs of the market.
When developing your investment strategy, consider the following factors:
1. Your investment goals
Specifically, for what or whom are you accumulating funds? Your investment goals will help you determine suitable investments.
2. Your time horizon
How many years will it be until you need to use what you have invested? Longer time horizons may provide flexibility for more aggressive investment choices.
3. Your tolerance for risk
Take your broader financial situation into account and consider how comfortable you are with varying degrees of risk as you pursue your investment goals.
Growing your wealth
Goals based investing
- Cash flow modelling
- Creating a financial roadmap
- Investment objectives
- Timescales and market activity and the impact of losses
- ‘What if’ scenarios
- Discussing legacy planning with your loved ones
- Inheritance Tax (IHT)
- Inheritance Tax Residence Nil Rate Band (RNRB)
- Lasting power of attorney
- Lifetime transfers
- Making a Will
- Preserving wealth for future generations
- Protecting your assets for the next generation
- Slicing up your wealth pie
- Children’s pensions
- Defined benefit (or final salary) pensions
- Defined contribution pensions
- Personal pensions
- Self-Invested Personal Pensions (SIPPs)
- The state pension
- Annual allowance and lifetime allowance limits
- Busting myths about pensions
- Increases to pension age and new normal minimum pension age
- Pension freedoms
- Pension withdrawal methods
- The lifetime allowance
- Delaying retirement
- Generating income from investments throughout your retirement years
- Importance of a retirement wealth check
- Retirement goal setting
- Retirement planning
- Reviewing your retirement plan
- Staggered retirement
- Taking control of your retirement plans
- What can I do with my pension?
- What happens to my pension on death?
- Market timing
- Minimising risk
- Multiple asset classes
- Portfolio insulation
- Pound cost averaging
- Principles of investing