Tag: growingwealth

Financial Planning

How To Build a Strong Investment Portfolio in 2024

Post author By Charles Mills
Post date 27 May 2024
No Comments on How To Build a Strong Investment Portfolio in 2024

How To Build a Strong Investment Portfolio in 2024

“Always keep your portfolio and your risk at your own individual comfortable sleeping point” – Mario Gabelli

3 min read

How To Build a Strong Investment Portfolio in 2024

“Always keep your portfolio and your risk at your own individual comfortable sleeping point” – Mario Gabelli

3 min read

Building a strong investment portfolio is essential for achieving your financial goals and ensuring you have the best possible chance to attain long-term wealth.

With 2024 having brought it’s own challenges and opportunities so far, it’s crucial to stay updated with the best practices.

So, today we are giving you our top 10 tips to building a robust investment portfolio.

1. Avoid Market Timing

Trying to time the market can be risky and often leads to suboptimal returns. Sure, you might get lucky, but sticking to a disciplined investment approach and avoiding making drastic changes based on market ‘noise’ is typically a sound strategy.

2. Assess Your Risk Tolerance

Before investing, take time to understand your risk tolerance. There is not a one-size-fits-all solution when it comes to investing, as opting for a 100% equity index might work for your friends or people in online forums, but not be suitable for you. Investing is a personal exercise, and your decisions should be based on your profile and yours alone. Your risk tolerance is often calculated based on factors such as age, financial goals, and investment horizon.

3. Maintain a Long-Term Perspective

Investing is a long-term game. Avoid making impulsive decisions based on short-term market fluctuations or the latest news headlines. Stay focused on your long-term financial goals.

4. Diversify Your Investments

Diversification is key to managing risk. Spread your investments across different asset classes such as stocks, bonds, real estate, and commodities. This strategy helps mitigate losses in one area with gains in another.

5. Understand Tax Implications

Be aware of the tax implications of your investments. Utilise tax-efficient investment accounts, such as occupational or private pensions, to maximise your after-tax returns. Proper tax planning and taking advantage of tax-efficient strategies can enhance your investment performance.

6. Consider Global Exposure

You don’t have to limit your investments to your home country. Global exposure allows you to benefit from growth in different economies from around the world. Investing in international stocks and funds can also help with diversifying your portfolio further. Remember, there are increased risks with global exposure that, whilst not inherently an issue, it is important to make yourself aware.

7. Focus on Quality Assets

If you are looking to pick specific companies, invest in high-quality assets with strong fundamentals. Look for companies with solid balance sheets, consistent earnings growth, and competitive advantages.

8. Stay Informed

We mention this a lot, but financial education and literacy is paramount to successful financial planning. Make sure you stay up-to-date with market trends, economic news and what is going on in the world. Being informed helps you make better investment decisions.

9. Rebalance Your Portfolio

Rebalancing your portfolio involves ensuring your desired allocation is maintained on an ongoing basis. Sometimes, you may find a well-performing asset becomes a more significant percentage of your portfolio than you would like. Hence, rebalancing ensures that your portfolio remains aligned with your risk tolerance and investment objectives.

10. Regularly Review Your Goals

Life changes occur quite frequently! Things like career shifts, children, or unexpected events can impact your investment strategy and your financial goals. Therefore, it may be more important to regularly review and update your financial goals than you might think. After you have done so, you could need to adjust your portfolio to reflect these changes and stay on track to meet your objectives.

Laying A Strong Foundation

Building a strong investment portfolio will usually require more than just the above list, though now you know the basics, you can work towards financial success with ease.

For bonus tip number 11, the best thing you can do to build a strong investment portfolio in 2024 is actually to get in touch with us today and book your initial, no-cost and no-obligation meeting. Our experienced Advisers will ensure you tick off all the above-mentioned points and more.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.

Tags 2024, 2024investmenttips, finance, finances, financetips, financialadvice, financialadviser, financialadvisor, financialplanning, growingwealth, independentfinancialadvice, investmentportfolio, investmenttips, portfolio

Financial Planning

What Is An Annuity And Should You Have One?

Post author By Edward Mills
Post date 20 May 2024
No Comments on What Is An Annuity And Should You Have One?

What Is An Annuity And Should You Have One?

“Here’s the bottom line about annuities; they’re confidence products” – Stan Haithcock

4 min read

What Is An Annuity And Should You Have One?

“Here’s the bottom line about annuities; they’re confidence products” – Stan Haithcock

4 min read

Annuities are designed to provide a steady income stream, typically for retirees.

They are insurance contracts where you pay a lump sum or series of payments in exchange for periodic disbursements in the future. Annuities can be a valuable component of a retirement plan, but they also come with complexities and considerations.

Below, you will found out what annuities are, how they work, the different types, their pros and cons, and whether you should consider having one. So, read on!

Understanding Annuities

An annuity is a contract between you and an insurance company.

In its simplest form, you make an investment in the annuity, and in return, the insurer promises to make periodic payments to you, either immediately or at some point in the future.

Types of Annuities

There are several types of annuities, each with unique features:

Fixed Annuities: These provide regular, guaranteed payments. They are considered low-risk because the insurer bears the investment risk.
Variable Annuities: Payments vary based on the performance of investments chosen by the annuitant. These offer higher potential returns but also come with more risk.
Indexed Annuities: Payments are linked to a stock market index. They offer a middle ground between fixed and variable annuities, providing some potential for higher returns while limiting risk.
Immediate Annuities: Payments start almost immediately after a lump-sum investment. They are useful for those needing income right away.
Deferred Annuities: Payments begin at a future date, allowing the investment to grow tax-deferred in the interim.

How Do They Work?

When you purchase an annuity, you either make a single lump-sum payment or a series of payments over time. The insurance company then invests your money and guarantees to provide you with periodic payments for a specified period or for the rest of your life.

Accumulation Phase: During this phase, you pay into the annuity, and the funds grow tax-deferred.
Distribution Phase: In this phase, the insurer starts making payments to you according to the terms of the annuity contract.

The Benefits

Annuities offer several advantages, making them an attractive option for certain people. Here are a few of them:

Guaranteed Income: One of the most significant benefits is the assurance of a steady income stream, which can provide financial security in retirement.
Tax Deferral: Annuities allow your investments to grow tax-deferred, meaning you won’t pay taxes on the earnings until you start receiving payments.
Customisable Payment Options: Annuities offer flexibility in how payments are structured, such as for a fixed period or for life.
Death Benefit: Some annuities include a death benefit, which pays out to your beneficiaries if you pass away before the annuity is fully paid out.

The Drawbacks

Despite their benefits, annuities are not for everyone and do come with several disadvantages. Here are a few of them:

High Fees: Annuities often come with various fees, including administrative fees, investment management fees, and surrender charges if you withdraw funds early.
Complexity: The terms and conditions of annuity contracts can be complex and difficult to understand.
Limited Liquidity: Once you invest in an annuity, your money is typically locked up for a period, limiting access to your funds. In addition, should the company paying you find themselves in severe financial difficulty, your income may cease.
Potential for Lower Returns: Compared to other investment options, some annuities may offer lower returns, especially after accounting for fees and inflation. This means that you would be able to pay yourself more or earn higher returns if you were to retain your fund.

Who Should Consider an Annuity

In short, annuities are suitable for those who are looking for a ‘guaranteed’ income and like the security that comes with it. Provided all goes well with the insurer, it can be comforting to know exactly what you will receive and when you will receive it.

You also have the option to only use a certain portion of funds to buy an annuity, whilst retaining access to the rest aimed at higher returns and performance.

How To Choose The Right Annuity

Selecting the right annuity involves careful consideration of your financial situation, goals, risk tolerance and more.

The top 3 things you can do to ensure you are making the right decision are:

Assess Your Needs: Determine how much income you need in retirement and whether an annuity can meet that need.
Research Different Annuities: Compare the features, benefits, and costs of different types of annuities.
Consult With Your Patterson Mills Financial Adviser: Our professional Advisers can help you navigate the complexities of annuities and choose the best option for your situation.

So, Is An Annuity Right For You?

Annuities can be a valuable tool for securing a reliable income in retirement, but they come with complexities and costs that must be carefully considered.

There are a myriad of options that go beyond the basics provided in this article, and this can be overwhelming for some. By planning early, doing your research, and consulting with Patterson Mills, you can make an informed decision about whether an annuity is right for you.

We are here to help you navigate the complexities of annuities and tailor the right strategy that meets your needs, whether that involves buying an annuity, or not!

Get in touch with us today and book your initial, no-cost and no-obligation meeting to learn more about how we can assist you in securing your financial future.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Tags annualincome, annuity, finance, finances, financetips, financialadvice, financialadviser, financialplanning, growingwealth, income, independentfinancialadvice, monthlyincome

Investments

The Pros and Cons of Real Estate Investing

Post author By Charles Mills
Post date 14 May 2024
No Comments on The Pros and Cons of Real Estate Investing

The Pros and Cons of Real Estate Investing

“Now, one thing I tell everyone is learn about real estate” ― Armstrong Williams

3 min read

The Pros and Cons of Real Estate Investing

“Now, one thing I tell everyone is learn about real estate” ― Armstrong Williams

3 min read

Real estate investing is a popular strategy for building wealth that involves purchasing, owning, and managing properties with the expectation of generating income or value appreciation over time.

Like any investment, it is not guaranteed to increase in value, and also has it’s own set of advantages and disadvantages.

Read below to find out what they are so you can make more informed decisions as to whether real estate investing is right for you.

Pros of Real Estate Investing:

Let’s get straight into it.

Here are some of the advantages to real estate investing:

Potential for High Returns: One of the primary attractions is its potential for high returns. Historically, real estate has shown steady appreciation in value over the long term, which in turn has provided significant capital gains. There is also the possibility to receive rental income from investment properties which can generate ongoing cash flow, thus further enhancing returns.
Compounding Returns with Leverage: The ability to borrow a significant percentage of an investment property’s purchase price can greatly increase total returns. For example, borrowing 75% with a real estate mortgage, secured on both the property and the rental income, would result in a 100% return on your invested capital after just a 25% increase in the property’s value (before applicable taxes).
Portfolio Diversification: Being separate from stocks and bonds, your investment portfolio can enhance its diversification with real estate. This is because real estate values often move independently of other assets, thereby helping to reduce overall portfolio risk and volatility.
Tax Advantages: Real estate investors often benefit from various tax incentives and deductions that can lower their overall tax liability. Expenses such as mortgage interest (excluding the UK), property taxes and insurance can often be deducted from rental income, reducing taxable income. Additionally, profits from the sale of investment properties may qualify for preferential capital gains tax treatment (excluding the UK), depending on the holding period or rules in your relevant jurisdiction.
Tangible Asset: Unlike stocks or bonds, which represent ownership or debt in a company, real estate is a tangible asset that you can see, touch, and control. Owning physical properties can provide a sense of security and control that can be appealing to those seeking more direct involvement in their investments. Along the same vein, real estate investments can offer the opportunity for hands-on management and improvement, allowing you to add value and increase returns.

Cons of Real Estate Investing:

We’re not here to waste time, here are the disadvantages!

Lack of Liquidity: One of the major drawbacks of real estate investing is its lack of liquidity compared to other asset classes. Unlike stocks or bonds, which can be bought and sold quickly, selling a property can be a time-consuming process that may take weeks, months, or even longer. Illiquidity can make it challenging for those wishing to access their capital quickly in times of need or take advantage of new investment opportunities.
High Upfront Costs: Real estate investments typically require a significant amount of capital upfront, including down payments, closing costs, and ongoing maintenance expenses. For many, this high barrier to entry can make real estate investing inaccessible or impractical. Financing real estate investments with mortgages can also introduce additional risks, such as interest rate fluctuations and leverage.
Risks From Leverage: Whilst borrowing to invest in property is often seen as a positive way of increasing returns, interest rate risks need to be managed carefully. The risk of interest costs exceeding rental income over time can be very real, especially during periods of rapidly rising interest rates. In such circumstances, exiting the investment may not be possible (see point 1 above) and so maintaining good cash reserves is vitally important.
Management and Maintenance: Owning and managing investment properties can be time-consuming and labour-intensive, requiring landlords to deal with tenant issues, property maintenance, and regulatory compliance. While hiring property management companies can alleviate some of these responsibilities, it comes with additional costs that can eat into overall returns. As well as this, vacancies, property damage, and unexpected repairs can negatively impact cash flow and profitability. Maybe not very ‘passive’ income after all..!
Market Risk: Real estate markets are subject to fluctuations and cycles, which can impact property values and rental demand. Economic downturns, changes in interest rates, and shifts in local market conditions can all affect the performance of real estate investments. You must carefully assess market risk and conduct thorough due diligence before committing capital to real estate to ensure you are making informed investment decisions.

Buy In or Steer Clear?

There are ways to invest in real estate without having to buy a property, such as through REITs, which can help with upfront and management costs, though the majority of the pros and cons remain the same.

It’s important to carefully weigh up these pros and cons when deciding whether real estate investing is right for you. How does it align with your overall financial goals, time horizon, risk tolerance and more?

Patterson Mills are here to help you answer these very questions (and more!) when it comes to considering real estate within your investment portfolio.

Get in touch with us today and book your initial, no-cost and no-obligation meeting.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Tags finance, finances, financetips, financialadvice, financialadviser, financialplanning, growingwealth, independentfinancialadvice, property, propertyinvesting, propertypurchase, realestate, realestateinvesting