How And Where To Invest
In our last article we presented the difference between different types of investments and the holdings within these investments, breaking down some of the jargon commonly used.
We explained what shares were and that shares, stocks and equities were all different words for the same thing. They mean an investor has part ownership, a ‘share’ of that company.
We extended this when we explained what bonds were and that bonds are also sometimes called fixed interest. Bonds are an investment where you loan money and in return receive a regular income (called a coupon) and at the end of the term you get your principal invested amount back.
We also provided descriptions of other types of investments, including cash, property (which is not just houses), commodities (gold, oil, corn etc.) and alternate assets. There are, of course, many other things (or asset classes) one can invest in from art, jewellery, and wine to limited edition Pokémon cards.
All of these are referred to as asset classes.
We then looked at some of the more frequently used investment types to invest in these asset classes. One option we presented was to invest in these asset classes directly, however, for many people that requires a degree of research and time that makes it impractical. We presented alternatives to investing in direct assets including managed funds, ETFs (exchange-traded funds) and discretionary portfolios.
Having clarified asset classes and types of investments, the third question is how you access these investments. For this I will use an analogy of purchasing something at a shop.
The products on the shelves are the types of investments - discretionary portfolios, ETFs, funds, and direct assets, plus cash term deposits, etc. The components of the investment types, that is the asset classes, are the ingredients in these products on the shelves.
To acquire these products that are on the shelves, you need a shop, either physical or online. In the investment world, this is the custodial platform, sometimes called the brokerage. This could be your bank, an online trading platform, a recommended investment platform like Moventum, Novia Global, Morningstar, a bank, or an exchange.
Therefore, if you want to invest, you determine the asset classes, the vehicle through which you buy the asset classes, and the platform through which you buy, hold, and manage the investments but not necessarily in that order.
Knowing the process is one thing; most importantly, you need to know what to invest in, when to change the portfolio mix, how to do that, and when to ignore the market news. This is where professional advice adds real value and what we at Arisaig Wealth Management do to help international professionals all over Europe.
There are many factors that go into the decision-making process. Your goals should drive all investment decisions. Your time frame, your capacity for loss or ability to recover from a market downturn, your expectation for return, and your risk profile all influence what combination you hold these asset classes in your investment or retirement portfolio. You then need to overlay where you are living, what other countries you have reporting or tax obligations in, where you intend to live in the future, any expected changes, provision for unexpected changes, and broader alignment with, and potential impacts on, your broader financial life.
If you are unsure what these many variables mean to you, speak with us, because the right investment mix for one person may be very different from the next.
The purpose of this article is to inform you of some of the foundational investment terminology so you can understand your investments better. It may be a base on which you want to build deeper knowledge, and to do that we have many articles and expert guides on our website www.arisaigwealth.eu.
To better understand how you can manage your financial life to achieve your most important goals, to ensure your portfolios and your objectives are aligned, and to discuss what you can do, speak with us at Arisaig Wealth Management.
