The importance of tailored investment solutions

The word “investment” encompasses a wide range of potential opportunities that can make your money work for you. It can be easy to become overwhelmed with the variety of investment avenues available on the market, which is why the services of an experienced investment professional are invaluable.

The investment solutions offered must, however, be tailored specifically to you.

 

Finding the right investments

There’s no such thing as a “one size fits all” approach to investing. Tailored investment solutions will take your situation and your finances into consideration – depending on how much money you have available to invest, different investment opportunities will become more appropriate.

What do you want from your investments? If you’re looking for short-term returns, you may find a more narrow selection of investments available than if you’re willing to invest for a longer period of time. Are you seeking to make your money work for you? Or are you more focussed on bringing new products to market or tackling social/environmental issues? This will also determine the best options for your investment.

It’s also always a good idea to invest in things that you understand, and have some sort of passion for. You can’t expect to make money investing in classic cars, for example, if you don’t know a Ford from a Ferrari. Your aptitude and passion for a certain product, industry or pastime will allow you to make more informed investment choices.

Ensuring an updated and diversified portfolio

A tailored approach to investments is about more than just finding and making the initial investment. It’s about managing your portfolio on a consistent basis to ensure you’re able to reach your investment goals. This ensures that you’re never stuck with stocks that aren’t profitable.

Keeping your portfolio diverse is the key to maximising your returns. Your investment professional will be able to take your investment interests, and use that to identify and present to you emerging opportunities as they present themselves. This keeps your portfolio consistently refreshed.

The right investment professional can be your guide to safer, more rewarding investments. You must always make sure, however, that their approach is tailored directly to you.

Why diversifying investments is a crucial part of any strategy

There are a variety of choices when looking to make investments: across industries, types of assets and even in different locations. But conventional wisdom in finance is clear on the fact that investing in one or two of these exposes yourself to a higher level of risk.

Seasoned investors often choose a strategy that spreads their money across a range of investments in order to minimise risk. Here is how to invest in a way that helps you to find a balance between risk and return.

Understand that investments behave in different ways

Various factors are in play for different types of investments and these can include interest rates or general economic policy, as well as from conflicts and even natural disasters. A positive for one investment does not mean the same for the other and conversely, can occasionally lead to a negative outcome.

Because such a high number of factors are involved in determining how well our investments perform, it is important to diversify so that when one investment falls another may rise. The difference between your worst and best-performing assets is often huge which means it can be vital to diversify your portfolio.

 

Check where your investments are

If you have already started to dabble in the world of finance, such as in a stocks and shares ISA or in your pension, then you should be checking where your money is going. Should these funds be invested in a quite narrow selection then you could be taking on unnecessary risk.

When looking at changing this up, do not allow yourself to be tempted by the prospect of short-term returns on specific asset classes. Generally speaking, investments should take a long view and what is most important is the overall performance of your portfolio.

Remember: the asset class that performs best is liable to change each year and an individual asset class can vary wildly in how well it does from year to year.

Delegate to the experts if unsure

Even if you have the knowledge and free time to manage your portfolio, it remains true that paid professionals in finance have the tools and insight required to build a really good strategy. This can be in an already-built diversified fund but these are often tailored to individual needs.

 

Should investors be wary of emerging market investments in 2019

Brazil, Mexico, Pakistan, and now Turkey – a series of currency crashes and political instability has forced investors to take another look at their emerging markets investments, as the once-hot sector shows its vulnerability.

Emerging markets have traditionally been seen as a high-risk, high-return alternative to blue-chip equities. These are high-growth markets, which are not too closely tied to influential economies such as the EU, UK and US. This means that when developed markets underperform, emerging market returns may be able to offer some relief.

For more than a decade, investment advisors and institutional investors alike have championed emerging markets debt and equity investments as a way of adding diversity to the average portfolio in times of economic uncertainty, while (hopefully) chasing double-digit gains.

And for a long time, this strategy paid off. In 2009, as the world’s most developed economies suffered from the knock-on effects of the global financial crisis, the MSCI Emerging Markets Index returned a massive 78.51 per cent for the year. Likewise, while the US and the UK dealt with Trumponomics and Brexit, respectively, MSCI’s emerging markets index returned 11.19 per cent in 2016, and 37.28 per cent in 2017.

However, at the end of the first quarter of 2019, these norms appear to be shifting. Economic growth is still sluggish in the UK, EU and US, and emerging markets are also starting to struggle.

In February 2019, the MSCI Emerging Markets Index returned a paltry 0.22 per cent, against 3.01 per cent on the sprawling MSCI World Index. In the 12 months from 28 February 2018 to 28 February 2019, MSCI’s emerging markets index lost 9.89 per cent in value.

The finance community has offered numerous theories to explain the cooling off of the emerging markets space. First, there is the ongoing effect of global economic instability. For instance, the US trade war with China has pitted the world’s largest developed economy against the world’s most influential emerging market economy, with both sides ultimately losing out.

Secondly, a recent run of elections in significant emerging market economies such as Brazil and Mexico have upended those countries’ investment plans. In Mexico, the left-wing leader Andres Manuel Lopez Obrador has increased public spending, placing the country’s credit rating at risk. And in Brazil, far-right disruptor Jain Bolsanaro has concerned investors by placing the country’s welfare reform bill under threat due to inaction.

Turkey, meanwhile, is experiencing massive currency devaluation due to a combination of upcoming local elections and ongoing debt problems in the country. And in Pakistan, the cumulative value of the country’s stocks has fallen under MSCI’s required ‘Emerging Market’ threshold for the first time ever, raising concerns that it could be relegated to ‘Frontier Market’ status.

All of these developments are weighing heavily on the fixed asset investments of emerging market investors across the world, and there is no sign that this is due to change any time soon.

For experienced investors, this is all part of the emerging markets risk/reward balance. But for risk-averse portfolios, it may be time to diversify elsewhere.