HSBC Column: Derek Proctor on where to invest
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By Derek Proctor, regional director at HSBC Private Bank in the Midlands. THERE is one simple answer to the question of where to invest – and that is everywhere! It is very important that high net worth individuals have a portfolio spread across a range of investment options based on their personal circumstances and attitudes to maximise opportunities and minimise risks. At the most basic level, it is, of course, vital to have some cash as part of an investment portfolio to cover planned expenditure such as household bills, a new car, tax and in case of emergency. However, with interest on a deposit at around two per cent, after tax at 40 per cent, the investment will end up falling in value, meaning it should represent only a relatively small proportion of total investment. Beyond cash, you need to understand what the point of investing is. Is it a short-term strategy for planned expenditure one or two years away? Do you need a regular income? Or is it a longer-term investment to preserve wealth? Once this has been decided, you can think about spreading your investments across various different areas of your life – so some might be in your personal name, while others might be in a trust, pension, business or charity. However, each of these areas may have a different investment objective, which means they must be considered separately. The next step is to establish your personal attitude to risk; after all, even cash carries a certain degree. Different kinds of risk will apply to different investments, whether market risk, currency risk and issuer risk, and you need to understand the level and the type that you are prepared to accept. This will help you to build a well-balanced portfolio, reducing risk as far as possible and balancing returns. A quality, robust portfolio might include bonds, equities from across the world, hedge funds, private equity and property as well as cash; in some cases, it may be possible to take out capital protection on some of these if you are willing to tie up your money for a specified period of time. Once all this is in place, the key is not to simply ignore it. A portfolio needs constant monitoring, changing it where necessary to ensure it does not become unbalanced as investments become more or less attractive. It will also change based on your needs and attitudes, which are likely to shift according to changes in circumstances or wealth. Finally, it is vital that you need somebody to support you in the form of a good quality, well known private bank or IFA who will act as your trusted adviser. A good adviser will take the time to understand you and your objectives, helping you to build your portfolio without being driven by commission. And if things go wrong, they will be able to take an unbiased view on your best options, giving an honest opinion and remaining on your side, whatever happens. More articles in
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