There is no one-size-fits-all where investment is concerned. What investors should keep in mind is that the quicker the timeframe of getting rich, the higher the risk and the associated probability of major financial distress. On the other hand, acquiring sustainable wealth is the product of a cautious and well-balanced approach; a steady, disciplined and long-term journey.
Getting a financial adviser is always a good thing. Your adviser should guide you towards financial priorities, provide you with market insights and then recommend investment strategies that best suit you. This of course can only be achieved after a comprehensive discussion has taken place between you and your advisor, within which a range of topics will have to be understood by the adviser. This will include, but won't be limited to, your financial and personal circumstances, time horizons, future objectives and risk appetite. After considering all aspects that make up your profile, only then, can the adviser customise an investment portfolio to suit your needs.
As I have said before investors must be aware of the risk and returns of each investment option, and while considering a good balance between liquidity and the medium- to long-term investments, a financial advisor will recommend a diversified portfolio that will include a range of investment solutions like capital-protected investments, bonds, mutual funds, structured notes and alternative investments. Being more informed about the investments made and maintaining this diversity in a portfolio will then prepare you as an investor to ride thought difficult market conditions and remain focused on future objectives. Clients need to understand market volatility and keep a medium- to long-term view (3-5 years) when it comes to wealth management.
The writer is regional head of wealth management and insurance, HSBC Bank, Middle East.
1 By linking their performance to indices such as the Dow Jones, Nasdaq or the Libor rate, structured products offer investors the potential returns that can be achieved by riskier assets, while providing the peace of mind that comes with the capital protection feature.
2 Bonds on the other hand, suit investors who are in need of regular income. This is achieved by offering a fixed rate of return, known as a coupon rate. Bonds lower the volatility an investor is exposed to, while improving total returns.
3 Mutual funds are the most popular type of investment structures world wide. These will offer proportions of different kinds of investment instruments, from low to high risk asset classes, tailored to the investor's specific needs and risk profile. Mutual funds allow your money to be pooled along with other investors; this feature reduces the risk as well as the administrative costs involved in maintaining such a portfolio.
4 Islamic investments have gained in popularity over the past recent years, catering not only to Muslim investors, but also to those who seek specific ethical and socially responsible investment structures. Customers can choose from a wide selection of managed Islamic funds, regular performance tracking and financial plans. Whatever the level of risk the customer opts for, they can choose to stay local or go global to satisfy their investment needs.
5In addition to lump sum investing, maintaining a disciplined savings plan will also prove to be, an essential part of successful future financial planning. These systematic investment plans allow you to buy into a particular investment at different price levels, buying more of an investment when markets are down and less when values increase. By doing this, clients smooth out the price they have incurred to purchase an investment, thus allow an averaging of the cost, a practice known as dollar cost averaging. These plans are easy, convenient and cost effective, enabling you to prepare for future events such as marriages and expensive college fees.
Your adviser will need a bit of your time to make your portfolio work