Viewing posts categorised under: Investment objectives

Measuring investment performance

By Mark Quinn
This article is published on: 11th April 2022

11.04.22

There are several different ways of measuring your investment performance, and I will run through some simple tips to allow you to dig deeper into your portfolio.

Firstly, do not forget to factor in fees such as adviser and management fees and structure costs when looking at returns. I have seen the cost of some investments run as high as 4% p.a. through hidden commissions and explicit charges. These have been disguised by strong market performance over recent years, but are likely to be exposed if we experience leaner years in markets in the future.

Simple benchmarking
A simple and quick method of comparison is looking at interest rates on cash accounts. If your investment returns are generating the same returns as cash on deposit, why are you taking the market risk?

Similarly, take into account inflation. If you generate a 3% return and inflation is 2%, your net return is just 1%; is this what you thought you were achieving?

Lastly, look at what similar passive investments have done. These types of funds simply track a stock market index and are inexpensive. If you are paying a fund manager to outperform and add value by trying to achieve higher returns, have they done this?

More in-depth methods

Market indices
A market index tracks the performance of a group of shares or other investments e.g. the S&P 500 index which tracks the performance of the largest 500 shares in America. They can be a useful barometer for the ‘health’ of an investment market as a whole but it is important to use them appropriately.

For example, you cannot meaningfully compare the performance of the S&P 500 index (100% shares) with a portfolio that consists only 40% of shares. Similarly if you are comparing a euro denominated portfolio with the US market which is denominated in dollars, then again this is not necessarily an appropriate comparison.

The downsides of using indices as a comparison are therefore addressed by the use of:

Peer group
A peer group allows you to compare investments that are similar in nature e.g. a specific class of investments or geographical region, and because you are comparing “like for like” it can be a more meaningful comparison tool.

Morningstar.com is a particularly useful tool in this respect and can guide investors with regard to an appropriate benchmark and peer group.

Quartile rankings
These are used to compare returns of investments in the same category over a period of time. Investments in the top 25% are assigned quartile rank 1, the next 25% quartile 2 etc.

They can be useful in tracking consistency – what is important is not the quartile ranking in any one period, but they allow you to track trends over multiple periods and time frames.

There is no one way, or right way, to compare performance and you will likely need to combine several measures to get a more accurate reflection of performance. Even more importantly, this should be done regularly to ensure you are doing all you can to achieve your financial goals. Finally, you should take into account the risk you are taking to achieve a set level of return, and this will be the focus of a future article.

If you would like to discuss your performance or how best to build your own portfolio of investments, please get in touch.

Investing as a resident of Portugal

By Mark Quinn
This article is published on: 23rd February 2022

23.02.22

If you are relocating to Portugal (or if you are already resident here) it is important to carry out a review of your investments to make sure they will be tax-efficient in your new county of residence.

Just because your investments are tax-efficient in one country does not mean that the tax advantages will transfer to another county. There are various ways of investing as a Portuguese tax resident, including directly held stocks and shares, collective investments, trust and pension structures. One structure that is beneficial to use in Portugal, and which is used widely across Europe as a whole, is the investment bond.

The benefits of investment bonds

There are several benefits to using investment bonds:

Tax deferral during accumulation phase – gains within an investment bond grow free of tax, known as ‘gross roll up’. This means you can benefit from compounding and tax is only payable when withdrawals are made i.e. the gains are realised
Low effective tax rates when withdrawing funds from the policy – Only the growth element of any withdrawal is taxable, and further tax savings are available after 5 and 8 years. It is important to note that this preferential tax treatment is enjoyed if you are a Non-Habitual Resident or a standard Portuguese taxpayer
Control of the timing of tax events – the bondholder can control the timing of any withdrawal which creates the taxable event. This can be done to coincide with low-income periods, for example
Investment flexibility and diversification – as income and gains roll up free of tax within the structure, you are free to pursue any investment strategy without being constrained by the potential tax consequences of re-balancing or switching between strategies. Additionally, these structures can accommodate a wide range of currencies, asset classes and fund management styles, such as discretionary fund management, index trackers and self-management
Simplification of tax reporting – You are only required to report and declare any income and gains when withdrawals are made. This makes local tax reporting very simple
Portability – the investment bond structure is widely recognised in other jurisdictions so you do not necessarily have to surrender your investment if you relocate from Portugal
Succession planning – investment bonds allow flexible and certain transfer of wealth to beneficiaries. This may not be possible with other investment types and the default “forced heirship” provisions under Portuguese law
Inheritance tax savings – with the correct planning, holding wealth in an insurance bond could mitigate or even completely avoid UK inheritance for British domiciles
Estate administration – in the event of death, the proceeds of the structure can be distributed seamlessly to your beneficiaries without the need for any formal probate process

Interested in learning more? Contact me now for a free financial review

At Spectrum, we can help analyse your options and if appropriate for you, advise on how to set up the optimum bond structure for you and your family, including:

How to set up the structure for maximum control and flexibility
Selection of a suitable provider and jurisdiction to hold your investment in, being cognizant of the relevant double tax treaty with Portugal
Which currency to hold the investment in and advise on the underlying fund choice
Consideration of trust options
Regular reviews of the structure and investment strategy on an ongoing basis in light of ongoing changes in taxation and investment markets

You can contact me using the form below to find out more on the services we offer and to arrange a free financial consultation.

*Mark Quinn is a Chartered Financial Planner with the Chartered Insurance Institute and Tax Adviser qualifying with the Association of Tax Technicians.

What is a good investment return?

By Mark Quinn
This article is published on: 11th February 2022

11.02.22

This was a question posed to me by a client recently. I was taken aback by the question as most clients (rightly or wrongly) tend to have fixed expectations about what a ‘good’ and ‘bad’ return is. It was an excellent question and I answered by saying that ‘good’ isn’t absolute; it is relative to the economic and financial environment in which we live.

For example, I remember walking into Cheltenham & Gloucester, Manchester in 1997 and opening a savings account and earning 7.5% per annum! Back then, the Bank of England base rate was 7.25%. If at the same time you were achieving a 7.5% pa return by investing in say, shares or gold, this would not be a ‘good’ rate of return because you would be taking much more risk to achieve the same return as that offered by the bank and only a few basis points above the base rate.

So, with the Bank of England interest rate currently sitting at 0.50% and the ECB base rate at a negative figure of -0.50%, a 4% or 5% pa return looks very attractive today, even though it would not have done in 1997.

Another factor we need to consider when assessing what a ‘good’ return means is the level of risk we take to achieve the return.

In constructing our portfolios at Spectrum, we always consider performance in the context of risk taken to achieve that return. For example, two funds can both achieve a 5% pa return but one fund may have fallen in value by 20% whereas another fund may be down just 5%. Clearly, the latter is a better fund.

We can analyse this in more detail by considering “scatter diagrams” which is an interesting way of looking beyond headline performance figures.

CLICK ON THE IMAGE ABOVE FOR A LARGER VIEW

This type of chart shows performance on the vertical axis and compares this with volatility on the horizontal axis, which is a measure of risk.

Ideally, we want a fund that is in the top left of the chart i.e. it has very low risk and a very high return. Unfortunately, we know that we cannot have our cake and eat it and in the real world we have to take risk to achieve return, but the important thing that these types of charts highlight is if you are taking risk and not being rewarded for it.

For example in the above chart, fund B (purple square on the far right) is taking a high level of risk relative to the other funds as it is the furthest right on the horizontal axis and it is achieving a high level of performance as it sits high up on the vertical axis. Now, looking at fund A (aqua square second from the right), it has achieved a higher level of performance than fund B but has experienced much less volatility. It is clearly a superior fund, achieving higher performance with less risk.

The other factors we must also take into account when considering what a ‘good’ return means are the cost of running the investment and the impact of taxation.

Ensure you consider all costs when assessing whether you are getting a good return or not. Each fund manager will charge a percentage ongoing fee, but do not forget to factor in transaction costs on buying and selling investments.

Often more damaging is the taxation. Are you paying capital gains tax on each transaction as it occurs? Could you roll this up instead and benefit from compounding? Or are the tax implications impacting the decisions you make as an investor?

For example, a buy-to-let property that offers an attractive gross yield of 6% per annum looks like a good return on the surface, but once ongoing costs and tax are factored in, your net yield could be much lower, at around 2-3%.

Lastly, when comparing investments, you must always do a like-for-like comparison. So when you are benchmarking your investment ensure it is against its peers, for example, there is no point in comparing the gross return of your buy-to-let property against a BP stock you hold.

Download our guide to Investment Risk

Investment options

By Jozef Spiteri
This article is published on: 18th January 2022

18.01.22

Trust in the financial sector

Choosing investments can be daunting to someone who does not have a good understanding of financial matters. It is normal to feel intimidated when facing something you don’t understand, and it is a reaction many people have when considering investing their money.

For these people, the ideal investment is often something they can see and touch. Such investments are usually the purchase of property to let, or the establishment of some sort of business selling goods or services. Done correctly such ventures can be very profitable, but these types of investments require a lot of time and money, so they might not be suitable for most people.

An alternative is investing in financial markets, but how can you overcome the mental block when attempting to allocate your money? The best first step is to consult an adviser who will walk you through the key points of such investments, explaining the potential risks and also rewards of different investment options, and who will take the time to come up with the correct solution for you.

However, the most important step to get more comfortable with financial markets is to actually start investing. An analogy I like to use is of a person who has never been swimming, fearing that something terrible would happen if they were to get into the water. Typically, they would start by dipping their toes and legs in, getting a feel for this un-chartered territory. Once they feel comfortable, they will continue to walk further out, until eventually they will be completely at ease in the water. This is the approach new investors should take when looking to enter this “new world”.

If you are feeling confused or overwhelmed with all the different investment options available to you, feel free to reach out to one of our advisers. In the initial meeting we will be able to help you understand better what will suit you best and can answer all the questions you might have. All initial meetings are free of charge and there is no obligation to proceed with an investment.

Investment diversification

By Jozef Spiteri
This article is published on: 12th January 2022

12.01.22

A word which seems so simple, a concept that many think they can easily master, but do you fully appreciate what diversification means? If you check the meaning of diversification, you would find that in business terms it is usually the act of varying the range of products or services offered, or broadening the field of operations. In investment terms it has a similar meaning. Diversification involves spreading your money across different assets and asset categories.

Most of the time when people tell me that they are investing and I ask them if they have Investment diversification, I am met with a resounding “Yes, of course”. They then might go on to explain what they invested in and it is usually things which they would have come across on social media or heard about from another “investor”. These portfolios might comprise shares in a few US companies, a couple of US bonds and possibly some cryptocurrency for a touch of risk. Such a portfolio would seem OK to someone who had just begun investing some spare cash, but is it diversified?

Such a portfolio is not really diversified at all, and I will explain why. Starting off with the first part which is an investment in a few different shares. Firstly, they are all from one geographical region, meaning if something dramatic happened in US stock-markets, they would probably all be affected to some extent. Secondly, inexperienced investors often buy shares based on something they have read online or something they have heard from a friend or colleague. These investments are typically in growth stocks, in other words shares in companies which are perceived to have strong earnings potential and growth prospects, but often with a correspondingly high share price. Investing exclusively in this type of company may prove successful but also carries significant risk, as the expectation of highly profitable growth (sometimes reflected in an inflated share price) may not be realised for many years, if at all. This is why it is sometimes sensible to include more mature company shares in a portfolio, or possibly shares in a company paying good and sustainable dividends.

Moving on to the bond part of the portfolio, often this would be one or two bonds issued by the US government, maturing in say 10 years. It might also include a corporate bond to add a little bit of diversification. But how much attention has been given to the financial strength of the company issuing the bond or the bond’s yield to maturity (how much is received in regular income up to the date the bond matures). These are just a couple of basic questions that should be asked when considering direct investment in a corporate bond.

This brings us to the cryptocurrency portion of the portfolio, often consisting of holdings in popular names such as Bitcoin or Ethereum, or in a new ‘crypto’ trending online. Although I have nothing against a small allocation to cryptocurrency, it should always be treated as speculative with the likelihood of volatility and a high risk of capital loss. I sometimes question whether people investing in cryptocurrency understand the basics of this asset class, including its regulatory status and its ability to function as a currency. To read more about cryptocurrency – click here

One question all investors should be asking about diversification is how to achieve maximum returns with minimum risk. Or, put another way, how to make the most of their money without jeopardising their financial security. A well-diversified portfolio should include exposure to a range of asset classes, for example shares, bonds, property, commodities and cash. Investments should also not be restricted to a single country or geographic region, nor to a single theme or economic sector.

In practice, most people do not have the time or knowledge required to build a well-diversified portfolio which achieves the right balance between risk and reward, between capital growth and capital preservation. At Spectrum, on behalf of our clients, we therefore focus on identifying professional investment managers who specialise in maximising returns from efficient portfolio diversification.

If you have any questions regarding asset diversification and investment returns, our advisers are available to help. We do not charge fees for initial consultations and you have no obligation to use our services after meeting us. Please get in touch to learn more.

Market volatility

By Gareth Horsfall
This article is published on: 21st October 2021

21.10.21

We are undeniably in full swing after the Italian summer. Almost everything seems to be operating on a normal basis again, although ‘normal’ is always subjective depending on where you live in Italy. Roma doesn’t really qualify for normal, even on it’s best days!

Just how much people are getting back to normal again after Covid has amazed me. The memory of lockdown and ‘esercito’ trucks rolling out of Bergamo seems to have disappeared into the small corners of our minds. It might just be a self-protective mechanism, or maybe, like me, you are just happy to be able to go about your life in a relatively normal way again.

Normal for me is also talking to and seeing clients in person regularly, of which the latter has been somewhat missing for the last 18 months. I was reminded of this on a telephone conversation with a client the other day who said, ‘I haven’t seen you for a while Gareth’. It was said in such an innocent way, almost forgetting the last 18 months of various travel restrictions. A completely inoffensive remark and it made me realise that I haven’t seen many of my clients for quite some time now and that I really must get back on the road again. So that is my plan over the winter and coming months. I feel starved of client contact, something which I really cherish, and so I will be getting out there very soon.

Anyway, I don’t want to go on too much about my work plans as I have something much more interesting to write about…financial markets. Well, interesting for me at least!

As I am sure you are acutely aware there are millions of in-depth, factual and accurate analyses of the current global economy and the response of financial markets to Covid. I don’t wish to get into that (If you would like a recent world market roundup then just email me and I can send one through easily enough). What I do want to talk a little about is how we respond to financial market volatility (i.e. the rising and falling valuation of your portfolio) as the Covid recovery continues.

“When a long-term trend loses its momentum, short-term volatility tends to rise.
It is easy to see why that should be so: the trend-following crowd is disoriented”.
George Soros

The Covid recovery is likely to mean a prolonged period of uncertainty for economies and companies. The initial market momentum after Covid and subsequent recovery is stalling a little at the moment. This is not a long term structural problem, as most indicators point to a return to ‘normality’ (there goes that word again! What is normal anymore?), that being travel, consumption, leisure etc, within a year or so. But the global recovery is not taking place uniformly. Herein lies the problem. Some emerging markets for example are still suffering from high Covid infection and death rates and battling the pandemic. Supply issues mean that many raw materials in our Western economies are scarce and we are seeing price rises as a result, and while this continues it means that there are more risks for companies and individuals. This inevitably means more volatility in our investment portfolios than we have seen in the last two years, which have largely been positive.

My usual advice when we enter periods of volatility is ‘Don’t constantly monitor your investments’ – that well worn recommendation that doesn’t really help anyone’s anxiety. The fact that we now have 24/7 access to information can be a curse when it comes to your investments.

The value of your investment can go down as well as up
I understand nervousness around investments. Is my money going to be there when I most need it? Is it safe from fraud? Will I recoup those losses or are they lost forever? I invest my own money and like anyone I like to see numbers in black rather than red. But I also understand that it’s a matter of patience, time and calm, rather than frustration, anxiety and rash decisions, that will see you through any period of volatility. It should be noted at this point that most of you who are reading this newsletter will have invested through the Covid crash, which was markedly more worrying than the current pull back in prices. So, when looking at our portfolios it is always good to have perspective. You may remember from 2020 that crashes happen quite suddenly and dramatically in response to a very specific trigger, whereas pull backs in stock market prices are often talked about for weeks or months and hypothesised on for what seems like ages before anything actually happens.

Success in investments is not about whether you climb that wall of worry or not (we all worry about our money) but whether you make rash decisions based on factors which are outside your control.

Are you a person who is more susceptible to making rash investment decisions?
You might be interested to hear that the University of the Massachusetts Institute of Technology (MIT) have conducted some interesting research on personality types and decision making.

They wrote a paper in August this year, entitled ‘When do investors freak out? Machine learning predictions of panic selling’ and discovered that the investors who tend to ‘freak out’ with greater frequency fall into one or several of the categories below:

Male
Over the age of 45
Married
Have more dependents
Self-identify as having excellent investment experience or knowledge.
(It does bear mentioning that I fall into every category! – scary thought.)

In addition to the above, they identified other characteristics in panic sellers. Only 0.1% of investors panic sell at any point in time. However, when there are large market movements, they occur up to three times more.

Interestingly, 30.9% of panic sellers never return to reinvest in risky assets. However, of those that do, nearly 59% re-enter the market within six months.

The really sad fact is that the median investor earns a zero to negative annual average return after the panic selling. This is the most worrying statistic of all. The evidence is therefore clear: panic selling leads to losses.

But regardless of the figures and the logic coolheadedness just can’t complete with human irrationality, and the same mistakes happen again and again, even if logic dictates it should be the other way around. In one way, that’s why I am here. To help you navigate that mind swamp!

I am reminded of a few clients who contacted me around the time of the Covid market crash and said that this was a new world event, a new norm and that things would never be the same again. I encouraged them to ride the wave, and they are today sitting in a much better financial position then they were before. I had no way of knowing what would happen in financial markets, and I can tell you I did worry myself, but I do understand human nature after working in this business for over 20 years.

I do know that whatever event creates a crash, the only truth is that when markets fall there is an opportunity to buy more of the same at reduced prices! Capitalism is not going to fall, just yet!

Investing 101 for Expats Living in France

By Michael Doyle
This article is published on: 16th March 2021

16.03.21

With today’s economic environment of record low interest rates and high inflation, it’s crucial to understand your investing options. This article will clarify what you need to know about investing as an expat living in France and how we are here to help you.

First, what are your investment objectives? Do you want to preserve your wealth and continue its growth trajectory? Then we recommend reviewing tax efficient savings and investment insurance policies. These can be linked to a whole range of investment assets, from fixed interest securities and bonds, to developed or emerging market equities, specialist funds investing in soft commodities like agriculture or hard commodities like gold and silver, and lastly, alternative investments.

Which investments fit your portfolio best depends on the amount of risk you are willing to take and what kind of returns you are seeking. So, let’s break down the specifics you need to know when thinking about your portfolio.

• Fixed Interest Securities and Bonds are a form of lending that governments and companies may use as an alternative way to raise funds. When you buy a share in a company you own a small part of that company, when you buy fixed interest securities, you become a lender to the issuer. The benefits may include protection during market volatility, consistent returns and potential tax benefits. Some downsides include potentially lower returns, interest rate risk, and issues with cash access.

• Developed Market Equities are international investments in more advanced economies. The benefits include investing in a mature economy that has greater access to capital markets. Drawbacks include more expensive market valuations and potentially less upside.

• Emerging Market Equities are international investments in the world’s fastest growing economies. Some benefits include the potential for high growth and diversification. The potential downsides include exposing yourself to political, economic, and currency risk depending on which countries you choose to invest in.

• Specialist Fund Investing is ideal for investors seeking exposure to specific areas of the market without purchasing individual stocks. One popular area is natural resources, with the three major classifications of agriculture, energy, and metals. A benefit to investing in commodities is that they’re completely separate from market fluctuations so it diversifies your portfolio and offsets stock risks while providing inflation protection. However, commodities can be exposed to uncertain government policies.

• Alternative Investments are financial assets that do not fall into one of the conventional equity, income, or cash categories. Examples include: private equity, hedge funds, direct real estate, commodities, and tangible assets. Alternative investments typically don’t correlate to the stock market so they offer your portfolio diversification but can be prone to volatility.

Overall, it’s important to have a diversified and balanced investment portfolio so understanding each category is key. Keep in mind that when it comes to investing, advice is not one-size-fits-all. That’s why we are here to help personalise your investment portfolio to match your specific needs.

In today’s financial climate it is vital to understand your investing options. Many experts have a positive outlook as vaccine distribution increases and fiscal stimulus boosts economies. Intelligent investing is essential when building and maintaining wealth so consult with your Spectrum IFA financial adviser and start planning today!

How can expats can get their ‘nest-egg’ savings working harder despite low-interest rates

By Craig Welsh
This article is published on: 2nd April 2013

02.04.13

Returns from bank savings accounts are at an all-time low, and savers are becoming increasingly frustrated. Interest rates in the western world are at extremely low levels, with the euro base rate at 0.75 percent. In the UK it is even lower, at 0.5 percent. While this helps some people, such as mortgage holders with tracker rates, savers are being punished as banks have continually cut the interest rates paid on savings accounts. Retirees drawing a pension, or looking to buy an annuity, have also been hit hard in this low-interest rate environment.

Low interest rates are here to stay
First, it doesn’t look like this will change for quite some time. The prevailing policy of central banks has been to increase money supply (quantitative easing), maintain liquidity in the banking system and keep interest rates low. Even a slight increase in the base rate over the next couple of years is unlikely to result in decent interest rates on savings.

Second, inflation is running at around 2 – 3 percent depending on which part of Europe you live in. It just feels like everything is getting more expensive, especially food and energy costs. The end result is that we are effectively losing money by leaving it in the bank.

Of course, we all need to leave some cash in the bank as our emergency fund (most financial planners would recommend around six months of income). But it is the ‘nest egg’ money (the savings that we don’t really need in the short-term) that we can do something about.

How can you get your nest egg working harder?
With the objective of ‘beating the bank’ over the longer-term, you can build a diversified portfolio of investments. In plain English this means spreading your money around and not having ‘all of your eggs in one basket’. Assets primarily fall into one of the following categories: equities (shares in companies), fixed-interest bonds, property, cash or commodities.

Lifestyle investing
You need to be clear about your ‘Risk Profile’. At Spectrum, we carry out a ‘Risk Profiler’ exercise which aims to establish the level of risk you are comfortable with and helps you understand the relationship between risk and reward. We then employ a forward-looking ‘Life-styling Process’ which means building a portfolio to match your own personal situation and objectives.

The eventual portfolio should therefore match your risk profile, usually measured from ‘cautious’ at the lower end of the scale, ‘balanced’ and then ‘adventurous’ at the higher end. The investment strategy should therefore be appropriate for your stage of life.

What assets to invest in
There are literally thousands of investment funds and vehicles to choose from. At Spectrum, we filter these by using strict criteria when choosing clients’ investments. For example we only use: UCITS compliant, EU regulated funds. This ensures maximum client protection and highest levels of reporting. Daily priced, liquid funds, so that clients do not get ‘locked-in’ to funds. Financially strong and secure investment houses. Funds which are highly rated by at least two independent research companies.

Multi-asset funds
Multi-asset funds are popular with clients as they are managed by experienced asset managers who, through active daily management, can offer access to all asset classes within a single fund. Their job is to capture capital growth while also protecting investors when markets suffer a downturn. Some fund managers have a great track record of doing this, for example Jupiter Asset Management’s Merlin International Balanced Portfolio, which has returned +34 percent (euro share class, as at end Feb 2012) since launch in late 2008, with relatively low volatility.

Multi-asset funds can be used as a ‘core’ holding within a portfolio, with more specialised and sector-focussed funds making up the rest of the portfolio.

Equities (shares)
Many blue-chip companies have very strong balance sheets and pay dividends of around 4 percent, which is higher than current interest rates. This dividend income can be re-invested into your capital (unless you need the income). The capital value of course will fluctuate but if you are investing for the longer-term you have time to ‘ride out’ any volatility.

Equity funds can be global in nature, regionally specific (for example focussing on emerging market countries) or even country specific. Other types of equity funds focus on smaller ‘growth-orientated’ companies rather than blue-chip, dividend paying stocks.

Ethical investing
Ethical funds are also an option. These are funds which only invest in ‘ethical’ companies. They are screened and assessed on criteria such as environment, military involvement or animal welfare.

Fixed-interest bonds
These include government bonds and corporate bonds. Western government bonds were traditionally seen as ‘safe havens‘, however yields are now currently as low as cash. You could consider corporate bonds, which are categorised in terms of risk (higher-yielding bonds means higher capital risk). Emerging market bond funds (with exposure to local currencies) could also be considered.

Many investors like to get exposure to bonds via a fund, which is a diversified mixture of bonds. One good option may be Kames Capital’s Strategic Bond Fund, with a return of +57 percent (euro share class, as at end Feb 2013) since launch in November 2007.

Commodities Commodity-focussed funds can be volatile and would normally make up only a small part of a portfolio. However there is potential for long-term growth by investing in companies with exposure to precious metals and resources (gold, silver, iron ore, copper) as well as other ‘soft’ commodities such as agricultural resources and the food sector.

Property
Collective property funds or property-related shares could also form a small part of your portfolio. Physical property by its nature is illiquid but by using a property fund you can obtain exposure to shares in property companies, keeping your money liquid.

Review your portfolio regularly

It is vitally important that your portfolio is regularly reviewed. One reason why people do not get the most from their finances is the lack of regular attention paid to their arrangements. Consider using a regulated, independent adviser who should offer regular reviews as part of their ongoing service.

At Spectrum we have an in-house Portfolio Management team, helping advisers and clients monitor client portfolios regularly for performance and suitability. One aspect of our regular reviews is ‘profit-take alerts’; when one area of your portfolio has out-performed, then why not take some profits? Investors can really benefit from such active management.