The Importance of Family, Investing and Securing a Bright Future.
Updated: Nov 1, 2018
My family are my WHY and are without question, the reason I strive daily to create a bright future and work so hard to be a success. I understand the importance of values and in bringing up our children in an environment where balance and opportunity go hand in hand.
In today's hectic world, it is so easy to lose track of what is important as many of us are consumed with work commitments, travel, social activity and many other things that impede on our time for self-development. My attitude and mindset has always been geared towards broadening my knowledge and in developing skills that can assist me in creating a future full of security and promise, not just for me but for my family, clients and associates alike.
''The world is shifting and evolving rapidly. And if you are not changing positively or evolving with the times, there’s a pretty good chance that you’re stagnating, or worse still, going backward''.
As individuals, we all invest for different reasons, but primarily we are all looking to create positive uplift in building our nest eggs. How much profit we wish to make all very much depends on our risk appetite. With that said, below is an overview of the various risk profiles people should understand before making any form of investment. In addition there is some further information on tax wrappers surrounding ISA's and EIS schemes.
Ultimately, investing is to make your money work for you, rather than you, working for it.
All types of savings and investments (including cash accounts) have different risks attached. Risk means different things to different people. With investments, it is the possibility that you could lose money or that your investment may not fulfill all your expectations. Your view of risk is likely to depend on your short and long-term investment goals and how much you can afford to lose should the worse case scenario unfortunately happen.
In simple terms 'risk' means that if you want the potential to gain more, you need to accept the potential to lose more. Whichever choice you make as an investor, you need to feel comfortable with the potential outcome. The key is to know what you are buying, and why.
Low Risk Investments
With low risk products, such as a deposit account, the return you get is fixed for long periods. The amount of interest you earn may move up and down over time, but the changes will be small, far apart and advanced notification is usually given. Except for inflation, your capital invested will not change in value. It won't go down, but revenue you'll generate will be purely interest based.
High Risk Investments
Higher risk investments are less predictable. Taking a chance on the stock market can potentially deliver substantial gains. Take Company shares. Investors in blue chip companies are less likely to fall casualty to big fluctuations, but it has happened. If you purchase shares in the Alternative Investment Market, the risks are higher, as you're funding activities for relative newcomers. But if you pick a winner, the financial rewards can be good. Investing in unlisted shares is also deemed as a higher risk vehicle and selling them can also be a hindrance as they are not listed on an exchange, so a physical buyer has to be found in order to purchase them from you should you need to liquidate.
You will need to keep your eye on the market and prepare for swings in value. Result announcements, inflation, currency and political changes can impact the performance of individual company shares and entire sectors. Knowing when to pull out or stick with your investment is part of the risk. You may not lose money selling your shares, but a sudden leap in value could mean missing out on future gains.
Risk vs Reward
The risks you are prepared to take are individual to you. The potential to gain more means accepting the potential to lose more. At a time where interest rates are low, but the cost of living is ever increasing, having an alternative to allowing your money sitting stagnant with a bank could be beneficial.
Investments allow you to utilise various tax wrappers that can prove advantageous.
With an ISA, any growth is free from income tax as well as capital gains tax. Your ISA does not close at the end of the tax year, you keep the investment on a tax efficient basis for as long as you keep the money in the ISA. They do not need to be included on a tax return.
Onshore & Offshore Bonds
These types of investments are another tax efficient way of growing your money, as well as producing an income. They are deemed as non-income generating and therefore do not need to be included on tax returns.
An Enterprise Investment Scheme (EIS) is designed to raise capital and invest in small unquoted companies and in return for the high risk nature of the investment you can claim immediate income tax relief of up to the 30% of the investment made.
As an alternative, a Venture Capital Trust (VCT) offers similar attractive tax advantages in return for again investing in high risk fledging companies. A VCT is slightly different to an EIS as the actual VCT itself is a quoted company.
Both EIS and VCTs are subject to maximum levels of income tax relief. As EIS and VCTs are high risk products they are not suitable for everyone so it is very important you know the risks involved.
"Investing is important because it lets you put your money to work," financial adviser Douglas Boneparth of Bone Fide Wealth said in an interview. "By assuming a certain level of risk, you have the opportunity to earn a reward greater then what simply putting your money in the bank can do. Investing is fundamental to growing your wealth over the long term."
The above is for information purposes only and should not be deemed as advice in any way, shape or form. Individuals should speak with an Independent Financial Adviser before making any investment decisions.
"An investment in knowledge pays the best interest." - Benjamin Franklin.
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Oakmount and Partners Ltd. Est 2009.
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