The Seven Steps Of Wealth Coaching - Step 5

Step Five – Make Effective Investments

When you are planning your finances with a view to both now and the future, there are various steps you can take to help maximise your wealth. We have already looked at how to create a full picture of what you have and where you want to get to. This allows you to make changes that will improve your financial health and to start building on strong foundations.

A wealth coach can help you assess your financial health and make improvements to it if you are unsure. Once you have all these elements in place you can start to make effective investments. And we’re not talking about keeping cash under the bed.

An effective investment strategy takes many factors into account and is very specific to your personal preferences, circumstances, and requirements. There are various things you will need to think about. Before making or changing any investments it is always a good idea to speak to a qualified professional.

1. What is your attitude to risk?

Are you risk averse, or do you like to take bigger risks for the opportunity of greater rewards? Even though, as we all know, the markets go up and down, it is important to consider how uncomfortable or anxious you would feel with your investments showing a loss.

Investments should be structured according to your attitude to risk as well as when you need to access your investment. For example, you may have a different attitude to risk for a university fund for the next 5-10 years than for your retirement fund for twenty years’ time or so.

Markets go down as well as up – spreading your risk

All investments are made with the intention that they will increase in value. This is not guaranteed and is particularly true for shorter investment terms. All investments are likely to go down in value at times due to economic, environmental, or political factors. Knowing this makes it easier to avoid emotional triggers that might encourage you to act when the right thing to do is to stay invested as you are. Spreading your risk across various instruments will help with this.

It also helps to invest regularly, for example on a monthly basis. This helps mitigate market fluctuations.

2. What will you need and when will you need it?

You will need money that can be accessed in the short, medium, and long term. Your investments should reflect this to avoid penalties or missing out on greater returns.

3. Are you investing in the most tax-efficient way?

There are various ways in which you can invest to be tax efficient. Are you taking advantage of your ISA and pension allowances, for example? Have you considered the Inheritance Tax implications of any of your assets or investments?

4. Are you getting the right advice?

If you are not sure how risk averse you are, for example, a wealth coach can ask you specific questions to determine how much risk you are prepared to take. They can use this information to figure out the optimum investments for your situation. A wealth coach will help you structure your investments according to when you are likely to need access to your funds and with all the tax advantages available to you.

It’s never too early to make effective investments

By starting early, spreading your risk, and using tax efficiencies and the compounding effect you can create an effective investment strategy. And the right professional advice will save you money.

Speaking to a wealth coach will help you identify the strategies and decisions that are right for your circumstances. They can help you spread savings and investments between short, medium, and long term, diversify, and use available tax opportunities. Paula Bicknell Wealth Management can help you. Please get in touch as we would love to speak to you.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.