Pointers on how to build your own ‘Grand Designs’ portfolio

Being a regular viewer of the TV programme Grand Designs, this often brings to mind how many similar parallels there are when it comes to investment. 

If you haven’t seen the programme before, it takes you through the highs and lows of a family intent on creating their dream home. Quite often you see the subjects taking on the roles of project manager, architect and interior design guru and when money becomes really tight, the painter and decorator too.  By performing these important tasks themselves, the people involved believe that they will save a substantial amount of money, but in reality things don’t run as planned and when problems crop up the project invariably ends up running well over budget. Working to a strict budget without expertise and within a pre-determined timescale frequently proves to be much more difficult than is first thought.

So how does this compare to investing money?

Unless you have experience of building a house and all of the component skills this involves, it makes sense to consult with the experts and seek their professional advice.  The same principles apply to investments, or indeed, any other form of financial planning.

Understanding investments needn’t be overly complicated, but it does require careful consideration of what is to be achieved and by when, and using expertise can really help.  

A good adviser listens to their clients and clearly identifies, amongst other things, their goals, objectives, risk profile, timescale and investment experience. Where appropriate, they will challenge the clients’ thought processes to get a clear understanding of what is required. Only then will they have a ‘brief’ against which to work. It is the role of the adviser to listen, educate and inform their client and then review the work to be undertaken. 

Here are some key points most investors should consider:

  1. Firstly, set aside an emergency fund to call upon should it be required. This should be easily accessible and not tied in to something that can’t be accessed quickly and forms the cornerstone for most portfolios.
  2. Think about your investment goals. What is it you want to achieve in the short, medium and long term? Are these goals realistic and achievable?
  3. Understand how much risk you are willing (or able) to take in order to achieve your goals. You need to be realistic though, as a cautious risk outlook is unlikely to deliver high returns. Remember that security is generally a trade off against volatility and that risk and reward are usually linked.
  4. Think about diversification. Don’t put all your eggs in one basket and consider spreading investment risk.
  5. Seek professional advice.  Once you know what you want to achieve and by when, you can put this plan in place with your financial adviser and review it regularly to make sure you are on track.
  6. Be realistic and don’t forget that investments can fall as well as rise - virtually all investments carry some element of risk. These risks mean that unless there is a capital  guarantee present (rare and usually involves additional cost), you may get back less than you invested and just because an investment has performed well in the past, doesn’t necessarily mean that it will do so in future.

The common theme here is that all plans should be built around realistic timescales, within budget and with the help of skilled and experienced professionals, so this way you have a better chance of achieving your desired outcome.  

Matt Slessor, Financial Planning Consultant, Carlisle

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