Go wide, and go long.
It sounds like a sports play, but the analogy works nicely with investments too.
Perhaps you’ve been given an unexpected inheritance, or maybe you’ve managed to carve out a spare $20 per week from your weekly budget. You’ve decided that a sensible use of this extra cash is to invest it, so that the sharemarket can take over some of the mahi of growing your wealth.
But what exactly does that mean, and where should it go?
Basically, that’s up to you, but the experts would advise that you don’t try to ride one or two companies all the way to the bank, because that’s a little less like investing and a little more like gambling. Instead, they favour the “wide and long” approach. Investment specialists will generally advise you to invest in a diverse platform, using a medium-to-long term outlook.
“We’re not talking about 10 companies, or even a hundred. We’re talking about diversifying into thousands,” explains Kathryn Alborough of Castle Trust Financial Planning.
This means that you will own a tiny portion – a fractional share – of a lot of different assets, which makes it easier to ride out the market ebbs and flows and on average will leave you with a healthy annual profit. The average stock market return is about 10% per year for nearly the last century – we know past performance doesn’t mean it will happen in the future, but it is a solid indictor.
Some of those companies, like Amazon and Apple, will be familiar to you, and there will likely be plenty more that are not. Castle Trust also gives their customers the means to spread their investments across different countries and industries.
“It’s that big diversification that lowers the risk,” Kathryn says. The investment specialists have already done the work of handpicking a huge base of companies, furthermore the clients of Castle Trust now have the option of choosing sustainable portfolios, an offering which caters to values and personal priorities, contribute to a better world as well as capturing financial returns for the clients.
The Castle Trust team also works with people to time-match their financial decisions, helping them to pin down what the money’s for, to ensure it is there when it is needed.
Kathryn stresses that even the best-laid plans (or people’s minds) can and will change, which is why it’s important to include sensible buffers in any strategies.
The money can still be pulled out of the investment company and be back with the client at any time – it is not locked in like a term deposit.
“You can still withdraw any of that money at any stage, and it goes straight to you. We don’t hold it, and it is back in your nominated bank account within a few days,” Kathryn says.
The Castle Trust team is enthusiastic about offering education and opportunities that will ultimately put their clients in a better financial position. For more information about investments or anything else to do with your finances, pop in to see the team at Motueka’s Castle Trust Financial Planning, on Motueka’s High Street.