How confident you are with making investment decisions, and how you feel about risk taking determines the way you choose to build your investment portfolio. There’s no rush to make decisions when choosing investments. SIPPs gives you access to the very best fund managers, allow you to hold cash with tax relief on your pension contribution while you decide where to invest. However, this cash investment has little long term growth potential and charges will differ based on which investments you choose. If you are unsure about an investment decision, Capital Associates offer expert wealth management advice.
Historically the stock market has delivered better returns. Although interest rates for cash savings are currently low in many countries, since pensions are for long-term investing, you’ve usually got time to ride out short-term falls and end up with overall growth. However, additional risks with investing and the value of investments can fall as well as rise unlike the security offered by cash savings. With regards to the UK, Moneyfacts, a financial information firm, said that since the Bank of England cut the base rate to only 0.1% in March 2020, the average rate on an easy access account had halved to a record low of 0.3%. Whilst, returns on one-year fixed-rate savings bonds were on the verge of a new low, at an average of 0.92%.
For those who prefer a financial planning expert to choose and manage investments on their behalf, they may consider a ready-made portfolio, based on your attitude to risk and investment goals. Adventurous investors who are comfortable with risk choose a portfolio which focuses on higher risk and growth areas for maximum returns. More cautious investors may choose a conservative portfolio yielding lower growth, but offering more stability and peace of mind. Capital Associates can keep an eye on your portfolio to ensure that the aims still match your own wealth management goals.
Diversity is paramount when choosing your own investments. Different kinds of investments and sectors perform well at varying times, as do stock markets around the world. Investment risk cannot be eliminated altogether, so by making sure that your portfolio has a good variety of investments across a range of sectors, assets and regions can provide shelter when certain areas don’t perform as well.
Fund managers are equipped to professionally manage a collection of investments, favour different asset classes like bonds, shares and property and often use a range of strategies even if funds have similar objectives. Some investors choose to hire a number of fund managers so that they are not relying on a single approach or asset class to be successful. Each fund manager has their own objective such as to provide decent income or grow your capital. By investing in shares you have part-ownership of a company. Shares can be bought and held in your SIPP, along with other investments. Bonds are loans to governments and businesses. These are listed on the stock exchange and are traded like shares as are Investment trusts which are listed as companies on the London Stock Exchange. An Exchange-traded fund (ETF) tracks a commodity or stock market and is a listed investment which is traded like shares.