Protect and grow your wealth


Five key elements for a successful investment

Whether you have capital to invest or it’s time to review your portfolio to make sure it’s on track, there are five key areas you need to address for successful investing. These will help ensure your savings are working as hard as they can for you, helping you earn real rates of return (after inflation and tax) while being designed around your goals, circumstances and your risk tolerance.

1) Tax and estate planning considerations

A tax-efficient structure, such as an ISA or a UK pension scheme, can keep most of your investments in one place and, importantly, provide protection to legitimately help you avoid paying too much tax. You want to ensure that as much of your hard-earned wealth as possible is placed in the most appropriate structure to limit your tax liabilities. At the same time, consider your estate planning wishes, so that your investment capital can be passed on to your chosen heirs as easily and tax efficiently as possible.

This was perhaps easier to achieve in the UK where we are used to the local rules, but here in Portugal, with a foreign tax and inheritance system, it is crucial to take advice from someone familiar with the nuances of Portuguese. plans and how they can impact your wealth.

2) Your investment risk appetite

Of course, no risk often means no return. And arguably even bank accounts carry risk, as we saw with the 2008 banking crisis.

We also have inflation risk, where the rising cost of living erodes the purchasing power of bank deposits over time, more so when interest rates are low. Although the recent surge in inflation may have surprised people, even low rates of inflation can reduce the value of your money over time.

Most of us recognize that for some of our assets, exposure to market movements gives us a better chance of outperforming inflation and delivering real returns over the medium to long term. However, the starting point should be to get a clear and objective assessment of your risk appetite. Otherwise, the result will be an investment portfolio that is not suitable for you.

There are very sophisticated ways to gauge your risk appetite these days, involving a combination of psychometric assessments and consideration of your other assets and investment goals.

3) Match your risk profile and goals to the optimal portfolio

Each set of investments can be predicted to display a given magnitude of risk. Low amplitude, less investment risk but also lower likely returns. A higher magnitude of risk leads to higher potential returns, but also higher investment risk. The key is to make sure your investment portfolio matches your attitude to risk.

It is extremely difficult to effectively assess your own risk profile; you will benefit from the objective advice of a third-party professional. Without such a solid assessment then corresponding to the optimal mix of investments, you risk ending up with a portfolio that is too risky or too conservative for you.

Another key initial step to making sure your portfolio is right for you is to establish your investment goals and time horizon. Your advisor will then help you build a portfolio based on both your risk profile and your goals.

4) Diversification

The next critical element is to ensure that your investments are suitably diversified and that you are not overexposed to any given asset type, country, sector or security.

By spreading across different types of assets (such as stocks, government bonds, corporate bonds, real estate, cash) and markets such as the US, UK, Europe and Emerging Markets, you give your portfolio the ability to produce positive returns over time without being vulnerable. to any underperforming area or stock.

This sound investment approach can be extended by using a ‘multi-manager’, to reduce reliance on a single investment manager making the right decisions in all market conditions.

5) Notice

Finally, it is important to review your portfolio approximately once a year to rebalance it, which your adviser will have to do as part of his continuity of service. As asset values ​​rise and fall, your portfolio may stray from one designed to match your risk profile and goals, and you may need to make adjustments to re-establish your weighting. origin. Also consider whether your situation has changed and the implications for your wallet.

Regular rebalancing helps control risk and can have a positive effect on portfolio performance.

Five key principles done right can help you have peace of mind to sleep at night while your investments and investment managers work as needed.

All advice received from Blevins Franks is personalized and provided in writing. This article, however, should not be construed as providing personalized tax or investment advice.

Keep up to date with financial issues that may affect you on the Blevins Franks news page at

By Adrien Hook
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Adrian Hook is a partner of Blevins Franks in Portugal and has been providing holistic financial planning advice to UK nationals in the Algarve since 2008. He holds the Diploma of Financial Advisor (DipFA) and is a Fellow of the London Institute of Banking and Finance (LBF) .


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