Could an investment portfolio help your retirement?
Let’s face it, now more than ever we deserve to feel positive about the road ahead. Especially when it comes to planning retirement.
The question is, could investing help you get more from your money during those all-important later years?
Enter Mark Butterworth, Head of Financial Advice – Planning & Research at Skipton Building Society. He kindly gave us some tips on building an investment portfolio – including why a little expert help could go a long way.
How an investment portfolio could be a good way of growing your money
You probably already have an investment portfolio of sorts without even knowing it. If you store your money as cash in your bank or savings account – that’s your current portfolio. But it may be that you could benefit from a more varied setup.
Mark adds, “Interest rates are currently low on savings accounts.
“That means it’s hard to make any (above inflation) returns on money held in a cash savings account.
“When it comes to your retirement financial goals – it might be worth considering spreading your money around different types of investments.”
Investing isn’t just about stocks and shares
The stock market is an important part of investing. But when you’re looking for growth, throwing all your money into stocks and shares could be unproductive. Instead, there are a range of options you could invest your money into. These are known as ‘asset classes’.
- Cash – this is where cash could be part of the picture. It’s the least risky asset and tends to deliver lower returns.
- Fixed income (also known as bonds) – a risk level higher than cash. With ‘bonds’, you buy debt from a government or company and they pay you back over a set period with interest.
- Stocks and shares (also known as equities) – typically the riskiest asset class, as stock markets ‘equities’ can be unpredictable.
- Alternatives – these cover all sorts of different assets, such as property and precious metals like gold.
So how do you decide which asset classes to hold in your portfolio?
Diversify, diversify, diversify
Mark states, “Experts usually recommend that you apply the golden rule of ‘diversification’ to your investment portfolio. Put simply, this means splitting your money across the various asset classes.
“It seems simple in principle, but it’s more difficult in practice. You’ll need to understand each asset class and how they perform differently. As this is something a financial adviser is highly knowledgeable on, their expertise could come in very handy here.”
It’s a balancing act to make stronger financial plans
Of course, you could opt to fly solo when it comes to allocating your money to different assets in a way that suits your needs. But there are a number of important factors to consider. And taking time to talk these through with someone who really knows their stuff, could make all the difference in your choices.
Mark adds, “The different factors available are very important towards establishing your attitude towards risk and the setup of your portfolio. It can prove tricky to achieve the right balance – taking a level of risk you’re comfortable with to help you reach your goals, while at the same time keeping a portfolio which shouldn’t be impacted too much by market falls.”
This is where the helping hand of an expert could really help. It’s an adviser’s job to understand your attitude to risk so they can recommend options that are suited to you.
Help at your fingertips
Skipton’s advisers are here to lend a helping hand in planning the next chapter of your life. They offer appointments over the phone – or via their award-winning video appointment service, Skipton Link from the comfort of your home.
Skipton’s recommendations are likely to include stock market-based investments. These are not like bank and building society savings accounts as your capital is at risk and you may get back less than you invested. The value of your investments and any income from them may fall as well as rise.