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The reason for putting a portfolio together is to reflect on future needs for capital and income and to give peace of mind that the desired outcome will be achieved without undue risk.

The first decision is with regard to Asset Allocation Kevin Johnson Jersey , which is simply explained as the amount of money invested in each of the asset classes. There are many asset classes such as stocks and shares, government gilts, corporate bonds, property, commodities, cash etc.

Although there are many Asset Classes it is universally agreed that most will fall into four main categories mainly cash, fixed interest, equities and property. Most other asset classes that individuals will come across are really sub-classes of these four.

The main benefits of having a spread of investments within these four asset classes is the understanding that the classes do not mirror each other’s movements Ryan Mallett Texans Jersey , up or down, i.e. there is a low correlation between activity in each class. It is accepted that cash has a very low correlation with shares and property, property has a huge correlation with shares, shares have a lower correlation with fixed interest. So if property yields or value is increasing this does not mean that cash rates will be affected either up or down.

The primary key to investment success is having an asset allocation with the right mix of asset classes and the right amount of money invested in each of the mix to give the desired return at the correct level of risk.

It is probably an obvious statement to make that investors will have less risk if they divide their investment between cash and shares than if they have it all in shares.

A brief on Cash

Cash is understood by all and the cornerstone of our economy. Although banks are in the midst of major changes in their structure due to recent internal turmoil, they are still perceived as one of the safest places to hold money. They will provide a guaranteed rate of return over a specific period with no risk of underlying capital.

The two drawbacks of investing heavily in cash are 1) the level of return is lower than other asset classes over a long period and 2) inflation.

Inflation effectively means that the buying power of your money is going down over time for individuals on a fixed income; therefore inflation is very hard on retired people unless they have sufficient assets to build in regular income increases.

For these two reasons it is advisable not to have all assets in cash, even in retirement. There are many safe investments now with higher returns than from cash which will protect the buying power if inflation is present.

Generally depending of course on an individual’s risk profile, if an individual is at the stage of growing their asset base they should only have a limited amount of cash as an excessive amount will create a drag on the investment performance.

A brief on property

When considering property, many of us immediately consider our residential property and of course for many that is the only exposure to property investment.

There are however many different types of property investment away from our residential such as Duane Brown Texans Jersey , residential buy-to-let, commercial property, overseas property, property fund, specialist property syndicates etc.

In recent years the attitude towards property investment changed, perhaps for the worse, whereby people believed property could be a short term investment, where historically it was always accepted as having a long investment cycle. I believe it is fair to say that unless an individual wants a hands on investment they need to consider investing via the myriad of funds or syndicates on the market. These structures basically allow a lot of individuals to pool their money and have property professionals manage the assets for them. The downside is of course Jadeveon Clowney Texans Jersey , that the management has a cost attached to it which will diminish the returns.

A brief on equities

Equities are a summation of the method of investing in stocks and share either directly or through structured funds such as Unit Trusts, insurance bonds etc.

A simple definition of what is a stock (or share) is simply ownership of a small proportion of a company. Holding a company’s stock means that you are one of the many owners (or shareholders) of a company, and as such, you have an entitlement to your share of the company’s earnings as well as voting rights attached to the stock.

Of course the challenge for investors is deciding what companies to buy stock in and many do not want to spend the amount of time required to research investment opportunities.

It was for the reason that ‘collective investments’ were developed which allows private investors to pool their funds with other investors and appoint professional managers to run the funds.

The performance of the fund is dependent on the investment philosophy and style of the fund manager. Some fund managers may choose stocks that are safe bets for steady appreciation; others will be more aggressive stock selectors whose funds will experience a lot more volatility and be considered to be in a higher risk category. It is amazing to think that the growth of the collective fund industry has resulted in more funds available than individual shares. So, as much care needs to be taken when researching a fund manager as goes into particular share purchase.

The Consideration Of Risk In Investment

Risk is a basic and underlying concept which is present in all aspects of investment. It is inherent in every financial product and there is no such thing as a financial institution that does not face risk in its business. So the main challenge for the investor is how to manage and instigate risk as it cannot be wholly eliminated.

Risk can really be categorised as downside risk i.e. that something will go wrong whThe British media always