Investment Advice London

 

We believe in making our clients wealthier and giving Investment advice that suits their objectives in the short, medium and long-term. We carefully assess your risk profile and recommend products that not only suit, but also provide a sufficient level of diversification in order to spread your risk.

 

Before investing your money it is always a good idea to check your liabilities, and build some savings to cover any contingency. It is also advisable to arrange some protection to cover yourself against unforeseen circumstances.

 

 

 

Investment Advice

 

The process for Investment advice is as follows:  

 

•  What is the aim of the Investment? Is it for Income or Capital Growth or for both?

 

•  What is the timeframe of the investment?

 

•  What are the principle taxes that need to be avoided or deferred? Capital Gains Tax, Income Tax or Inheritance tax?

 

•  What is the level of risk that is acceptable?

 

•  Will the investment objectives or the attitude to risk change in the future? (for example retirement in 5 years time)

 

•  Will the portfolio be actively managed, or is there a need for a fixed asset allocation?

 

The starting point for asset allocation for an actively managed portfolio is usually towards the cautious end of the risk spectrum. This is to say that it is preferable to invest in the riskier assets when the buying opportunity arises rather than diving in on all the asset classes regardless of timing.

 

It is common to hear that “the markets are driven by greed and fear”. It is crucial that when investing in the riskier assets, profits are taken along the Bull Run. In other words it is paramount that greed does not cloud the profits already made. When profits are made the funds should be placed in other riskier assets only if the buying opportunity is available. If not, there needs to be a careful selection of cautious investments to act as a default position.

 

These default positions should exist primarily to act as transitional holdings between making riskier investments and also as a safe haven when there are considerable risks across the asset classes that have higher volatility.

 

As buying opportunities arise, funds should be made available to invest. These will come from the cautious investments held in the portfolio. If the timing is appropriate, then fear should not enter into the decision making process.

 

 
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Risk

 

Risk is a concept that denotes a potential negative impact to an asset.

 

Despite the different ways in which risk can be described, a common way of defining Investment risk is as shown in the diagram below. Typically investment risk is between 1-5, where 1 is cautious and 5 is a high risk investment.

 

 

Market Timing

Fund Managers usually are of the opinion that “It is not Market Timing, but time in the Market”. This is rubbish, timing is everything. We understand that if you are a fund manager you would want people to invest in your fund and then remain invested, but this is not how a Wealth Manager approaches the ongoing advice on a portfolio.

 

If there is a systematic downturn in the Equity markets, which is a regular occurrence, then most Equity funds will suffer. The best way to avoid losses is not to be in Equities.

 

So how do you go about getting the timing right? Well the old principle of buy low and sell high is really the cornerstone of this approach. Buying low is achievable simply by being patient and waiting for the buying opportunities.

 

Firstly you have to be satisfied with the fundamentals of the assets you are investing in and you have to believe that there is growth to be had over the following 6-12 months at least. Secondly, you wait for recorrections. These need to be at least 10% from the peak. Patience is important and one must remember not to dive in early. The market only bottoms when it bottoms.

 

After a significant recorrection, the subsequent Bull Run tends to be quite solid at least initially, as there will have been a certain number of speculators or overexcited investors that will have got burnt by investing at the top of the market. The idea is simply that you will end up buying when everyone else is wondering what just happened.

 

Selling at the right time is probably the most difficult thing to do. It is emotionally stressful to get out when things are going well and the assets invested are continuing to grow. Taking at least some profits, however, is crucial. The sales can be carried out in stages if the market seems to be strong.

 

The key to timing is to be totally up to date with what the markets are doing. It is as important to watch both the values of the assets that you are in, as it is to watch those assets that you are not in.

 

Information on all markets is readily available with little or no cost. TV, newspapers and the internet provide enough data to analyse most markets.

 

If you miss a recorrection and still believe in the fundamentals of the asset you are holding, then hang on to it. As many traders will say " Trend is your friend".

 

Assessing Fundamentals

 

Economics is as much a way of life as it is a pure subject. It allows you to look at the world as a connected system, where any event has consequences and knock on effects.

 

Our intention here is to give general guidelines into what basic fundamentals drive the various asset classes. Economics or even detailed market models cannot take into account or predict all eventualities or events. Political decisions and the weather are great examples of unpredictable events that can wreck havoc with the markets, but risk is part of the investment process.

 

General guidelines for trends are as follows:

 

Equities – These markets across the planet are very connected. Often they all move in a similar direction based on market sentiment and expectations. The fundamentals here are driven by economic growth. The stock market of a particular country is linked to the economic growth and overall expectation of earnings growth. Put simply, if the economy is expected to grow, then the stock markets will reflect this. The faster an economy grows the greater the expected returns from the particular jurisdiction.

 

Fixed Interest – The driver here is interest rates. As interest rates rise, bond prices fall. Interest rates are driven by monetary policy (the control of money supply in an economy). The main instrument for controlling money supply is interest rate policy. As an economy grows there are inflationary pressures that, if not kept under control, can significantly effect a country's economic stability in the medium to long term. Interest rates are typically increased to cool the economy down and they are decreased when the economy starts slowing.

 

Commercial Property – The returns on this investment are driven primarily by the demand for commercial premises, which in turn is driven by economic activity within a given economy. This asset class is less volatile than equity markets as a downturn in activity may lead a company to reduce personnel faster than they are likely to give up premises. This is especially relevant as many commercial property leases are fairly long term contracts.

 

Commodities - By commodities we mean: Gold & Precious metals, Base metals, Oil & Gas, Agricultural produce such as Wheat and Orange Juice. All the various commodities have their own fundamental drivers of supply and demand. Prices are significantly volatile in this asset class. Market timing is therefore some what crucial. The drivers are economic activity, political decisions, wars and weather, to name a few.

 

Cash - Money market and deposit based investments are a safe haven for securing value, and as a transitional holding pending investments into more riskier asset classes. The returns here are driven by interest rates in a given jurisdiction and the relationship with the underlying inflation.

 

Financial Instruments

 

There is a degree of risk with all investments. The money invested could rise or fall in value. Investments are different from deposit based savings – they are typically designed for the longer term and involve higher risks.

 

For further information on the techniques employed to create a portfolio of investments that meet your criteria, please have a look at the Portfolio Management page.

 

For a brief description of most popular types of investment products, please click on the links below:

 

•  Individual Savings Account

 

•  Collective Investment Funds

 

•  Investment Bonds

 

Please note the above list is not exhaustive as there are a wide range of products that may better suit your criteria.