Being a millionaire doesn’t mean what it once did. Once you were a kid, one million pounds sounded like a life-changing amount. Today, it signifies a lifetime of working, saving, and investing. There’s no doubt about it, one million pounds remains a lot of cash.
Enough that you need to think carefully on how to invest it. Large sums of cash are in risk from over-taxation, loss-making investments and inflation, so as you build your wealth, it is important that you also build your understanding of wealth management.
So, prior to making any life-changing financial decisions, ensure you think about the following things:
Diversification – It is without saying that you ought to never invest your money in just one place. Regardless how safe that certain place might appear, there is still an component of risk involved. However, Read more helps you to mitigate this risk by spreading your funds across a variety of different sectors and markets. For most people, the first step towards diversification is choosing your equity/debt/cash split. Equity investments may include stocks and shares, property, or hard assets (including gold, wine or art).
Debts can cover the bond market, peer to peer loans, and gilts; while cash usually involves leaving your money in a banking accounts or partly in a cash ISA. Wherever you invest your cash, you need to weigh up the projected returns against the possible risk. The very best paying cash ISAs currently pay around one percent in interest, at a time when inflation is 2.6 per cent. Because of this any money left in those accounts is going to be losing approximately 1.6 percent of their value in real terms. On the plus side, you might be extremely unlikely to shed any more than that, unless your bank goes under.
As well as in that unlikely scenario, the Financial Services Compensation Scheme (FSCS) guarantees your capital as much as the price of £75,000. Beyond cash holdings, you will probably find inflation-beating returns. For the most part, debt is the more conservative option, with lower risk and fixed returns. Equity investments can pay attractive dividends, but – in the worst-case scenario – they could also collapse.
Having a £1m portfolio, it is essential that you decide on an equity/debt/cash split that you will be confident with, so you diversify further within all these categories. Should you don’t like the idea of researching lvkiwk possible investment option yourself, you can take a short cut to diversification by investing your hard earned money with a fund manager. A £1m portfolio will give access to a few of the top-performing funds in the united states, where your money will be invested for your benefit with a professional investment manager.
However, this alternative usually comes along with hefty management fees. Plus, you will have to accept because you are relinquishing charge of your money and entrusting it instead to some complete stranger. In the spirit of diversification, fund management investments should more likely be considered as a proportion of your overall portfolio.
Liquidity – Before you decide to invest any money, you ought to have some sort of investment goal in your mind. Maybe you’re saving for the retirement, for a trip, or for your children’s future. Whatever plans you may have for your £1m, you will have a point in which you will want to withdraw your cash. Invest using this date in mind. As an example, if you wish to retire in 10 years, be sure you don’t tie your money away in a 20-year bond. Likewise, if you feel you may want to get into a few of your funds at short notice, ensure that you aren’t likely to be susceptible to penalty fees for early withdrawal.