Abu Dhabi: Quite often I am asked: How do the professionals protect their own investments? There are three areas I feel most important to consider when taking protection of capital into consideration. Many people have made a good start building an investment portfolio, however they’ve made the start without setting any clear targets and objectives to measure their performance along the way. This leads me to my first point:
Planning. Failing to plan can lead to years of underperformance in your investment portfolio. Planning what you want to achieve within certain time frames can significantly improve your success rate.
If you have a wealth manager, then make sure you regularly meet to go through your performance to make tweaks as and when needed. So always have a detailed plan in place.
Diversification. I have met many people who have diversified their investments well, though only within one asset class. You may have a well-diversified portfolio of shares or property; however, if your portfolio consists only of property, you could be left overly exposed and suffer losses in the event of real estate taking a hit.
To reduce risk, not only should you be diversified within your equities or property portfolios, you should also spread your investments across different asset classes. A wealth manager should help you balance your portfolio across property, cash, bonds, commodities and equities to achieve goals whilst at the same time reducing risk.
Tax Advantages. Taking advantage of tax efficient methods to invest can generate an immensely positive result on your portfolio. All too often this is overlooked by many investors who at times put too much emphasis on a familiar asset class, when the best investment is ‘right under their nose’. Tax can be a complex affair and there is not a universal solution that will suit everyone. Using a good wealth manager can help you choose the right vehicle and jurisdiction for your situation to get the maximum from your investments.
If you take into account these three points and fix them in place, you position yourself with an increasingly higher chance at really achieving the success plus more that you desire from your investments.
The author is a UAE-based wealth consultant