rack up sufficient wealth to bring us in and through retirement usually requires an average life of patients who save and invest.
It consists of putting money into the construction company, buying a house (maybe even in a purchase), paying pensions, managing a stock portfolio and hiring a tax-friendly agency.
Often the journey is smooth, but sometimes the hiccup is de-rail – unexpected events such as redundancy and unnerving episodes such as the slippage of stock markets. Of course, the recent sharp declines in stock prices have destabilized many investors.
Solid foundations: there are some key elements that should be in everyone's portfolio
Whoever builds long-term wealth must diversify its activities, combining risky – but potentially lucrative – investments with money.
Here we highlight some of the basics that should be the basis of each portfolio.
No wealth portfolio should be without cash. It should be there not only to meet emergencies or financial needs – a new car or an unexpected trip – but to provide a counter for risky assets. It is the last ballast.
Forget that cash earnings are scarce and below the rate of inflation. Just hold on to the fact that £ 1,000 saved will mean at least £ 1,000 at some time in the future, with a constant drop of interest in the meantime.
Obviously, we need to be smart and ensure that our savings are protected by the financial services reimbursement plan. So do not save more than £ 85,000 with any bank or building company.
Investment platforms are increasingly looking to attract cash savers. For example, Hargreaves Lansdown now offers an "Active Savings" service that allows customers to save money in a series of fixed-term savings accounts. It means that investors can also be savers under one roof online, allowing them to keep a big chunk of their wealth portfolio.
A necessity: no wealth portfolio should be cashless
Active savings are not without defects. Currently it only provides access to nine suppliers, from family members, such as the Coventry Building Society, to the less known, such as Close Brothers and Vanquis.
This means that none of the best rates in our best purchase table on page 107 is accepted by the service. In addition, money can not be held under the tax-free personal retirement pension (Sipp) or an Isa, although Hargreaves Lansdown says this will be possible sooner rather than later.
Other liquidity management services are offered by Flagstone, Octopus and Raisin. All are differentiated by the amplitude of accounts available, how they operate and for the rates: some save, while others take commissions from suppliers. Reviews of all four platforms are available at savingschampion.co.uk.
Anna Bowes, director of the Savings Champion, says: "The rise of money management platforms is welcome, it means that savers are guided to better savings offers, and we hope that more choice will be available as the platforms grow of popularity ".
Savings Champion, a tariff verifier, provides both a "cash desk" and a "concierge service" that help savers maximize profits. Both services are subject to charges.
Like money, no wealth portfolio should be devoid of products derived from National Savings & Investments.
In fact, the government savings arm, no other provider offers greater financial security.
The choice of products is more limited than it was in the past, but the common holes in the portfolio include Premium Bonds (with a maximum participation of £ 50,000), which offer monthly tax-free premiums ranging from £ 25 to £ 1 million. .
Security: like money, no wealth portfolio should be devoid of products derived from National Savings & Investments
Income bonds remain a favorite, paying a monthly income equivalent to 1.15 per cent in the year (with a maximum stake of £ 1 million), as well as the Direct Saver account, an unannounced account which pays 1 percent (with £ 2 million savings limit).
Patrick Connolly is a chartered financial planner with Chase de Vere. He says that National Savings & Investments is an integral part of many customers' portfolios, adding: "With NS & I, savers receive a name and brand they can trust, supported by the government and can also benefit from competitive interest rates on some of its products ".
Gold is considered by many to be a safe haven in stormy times. In recent months, when equity markets have corrected and economic tensions have increased, the price of gold has reorganized.
From a low of 2018 in August of $ 1,180.40 per troy ounce, the price of gold rose to just under $ 1,300.
A recent survey of precious metals investors by Bullion Vault, an online bullion retailer, has indicated that nearly one in four believes that gold prices could rise by as much as 20% this year, with a 10% consent. For investors, there are various ways to get exposure to gold.
Safe bet? Gold is considered by many to be a safe haven in stormy times
The cheaper approach is to buy an investment that tracks the price of gold. These are called exchange traded funds, or ETFs, and are provided by people like iShares (part of the BlackRock asset manager) and Invesco. They can be purchased through a stockbroker and most of the funds platforms.
Purchases will be subject to a trading commission and an annual commission will be applied to the fund. For example, iShares Physical Gold charges 0.25%.
An alternative approach is to buy a fund with exposure to gold, such as personal assets, Rathbone Strategic Growth or Ruffer. The most targeted funds include BlackRock Gold and General and Ruffer Gold.
Except for personal assets, these funds invest in the shares of gold mining companies rather than physical gold.
Finally, physical gold (bars and coins) can be purchased from an online bullion dealer, such as Goldcore and Bullion Vault or the Royal Mint. Buyers may have stored it – paid for – or delivered, even if investors who adopt the second option will need to have a safe place to keep it.
The Royal Mint has just launched its gold coins and gold sovereigns of 2019, with a price of £ 259 and £ 136, respectively.
Do not be discouraged by the hostile label. These plans provide returns linked to the stock market, but with integrated protection so that they can generate profits if stock prices fall or move sideways.
They are explained better by an example. Mariana Capital has just launched on 10.10, a plan with a maximum duration of ten years, but which can end sooner, according to the performance of the FTSE 100 index of the hundred best shares of the London Stock Exchange.
Three options are available, but all require an investor to sit on their hands for two years. Then, when the stock market closes on February 22, 2021, its level will determine whether the plan continues or ends (known as "kick out").
Structured plans: these plans provide returns linked to the stock market, but with integrated protection
In Option 1, which is the least risky option, on February 22, 2021 Footsie is more than 2.5 percent higher than the February 22 of this year (at the beginning of the plan), the scheme ends abruptly.
The investor receives an annual return of 9.44% for the two years he has tied his money.
So on an investment of £ 10,000, they receive £ 1,888 plus their £ 10,000 back. Profit is considered as a capital gain in the tax year in which it is received. Under options two and three, the plans "kick" on the same date if Footsie is at the same level or higher, in the case of option 2.
In the case of option 3, it kicks if the Footsie is higher than 5%. In these cases, investors get £ 2.456 and £ 2.902 respectively, plus their £ 10,000. These are equivalent to an annual yield of 12.28% and 14.51% per year, respectively.
If the levels of the index have not been reached (and therefore there is no kick-off), the plans continue for another year. Then, in options two and three, the same test is applied again, resulting in the plan continuing or ending, resulting in payment of £ 3,684 (for the option two) or £ 4,353 (for the option three) .
Option 1 is more complex, as the starting point for football falls every year, which means investors are more likely to get their money back sooner.
Attention required: structured plans can not be easily dropped, so investors must be ready to have money tied for a while.
For example, on February 22, 2022, if the Footsie is at the same level or higher than that of February 22, 2019, the plan ends with a profit of £ 2,832.
And on February 22, 2023, it only needs to reach 97.5 percent of its original value. But there is a sting in the tail. If at the end of ten years, Footsie is more than 30 percent lower, an investor loses a portion of his original investment equivalent to the fall of the market.
So if the index fell 35%, an investor will only recover £ 6,500 of its original £ 10,000. Any fall in the index of less than 30 percent translates into an investor who recovers £ 10,000, but obviously they have lost the interest they would have earned if the money were in a savings account.
Ian Lowes, CEO of Lowes Financial Management, controls the structured plans. He believes that the products are "better" than they were. He says: "They provide defined results for investors on definite dates and in defined circumstances".
Stephen Womack, a hired financial planner with David Williams IFA, uses them for customers. He says: "They can provide positive returns even when stock markets are flat or declining, and I also like the kick-out function that forces an investor to make a profit, a mistake many investors make is to keep investments too long."
Yet they are not without risk. They can not be easily downloaded, so investors must be prepared to have money tied for a while. Investors can also lose money. Furthermore, not all plans are covered by the financial services compensation plan. But it's plans that are not covered by FSCS like 10:10 that are more profitable.
Here, the key is the financial stability of the investment bank behind the plan, which is responsible for honoring the promises of the plan. It refers to how the counterparty.
If you get in trouble or go bankrupt, investors could suffer big losses, as some did when Lehman Brothers – a counterpart of the plans set up in the mid-2000s – hit buffers in 2008.
In the case of 10:10 (written according to the Cayman Island law), the counterpart is Goldman Sachs. Others include Citigroup, Credit Suisse and HSBC. Although many structured plans can be purchased online, Womack recommends that you take advice because the products are complex. He adds: "They could represent 15% of a new portfolio that we recommend today".