Investment Adviser’s Ellie Duncan asks a selection of financial advisers whether a multi-asset investment strategy works for three different scenarios
Case studies:
1. Ms Stone is 34 years old, unmarried and has no children. She is an accountant and owns the two-bedroom flat that she lives in, having bought it three years ago. She earns £40,000 a year and invests 4 per cent of her salary in a matched company pension pot. Ms Stone has just been given a £15,000 lump sum following the death of a relative and wants to invest it with a view to buying another property in around eight years’ time. She has £5,000 saved in a cash Isa and no other investments currently.
2. Mr and Mrs Jones are both in their late 20s and recently married. Mr Jones works as a teacher and earns £29,000 a year, while Mrs Jones is on an annual salary of £31,000 as a marketing manager. They are currently renting and now they have paid off their wedding they would like to start saving to buy a house together, with a view to starting a family in six years or so. They have set up a stocks and shares Isa to start jointly saving into each month and aim to set aside £500 a month between them. Neither of them has any investment experience but they are willing to take some risk.
3. Mr Morris is 40 years old and lives alone, having divorced from his wife, with the separation financially finalised. He has two children aged seven and five and would like to start saving some money for when they reach the age of 18. He works as an IT consultant, earning £45,000 and owns the property in which he lives. Mr Morris already has £20,000 of savings in a stocks and shares Isa, which he plans to use to invest in a buy-to-let property as an additional form of income for retirement. He hopes the rental income will bring in approximately £1,000-£1,500 each month.
Patrick Connolly, certified financial planner, Chase de Vere Independent Financial Advisers
With an investment period of eight years, a decision needs to be made, in conjunction with the client, about whether to invest in risk assets or stick with cash. For non-cash investments, it is important to carefully manage risk as this money will be required at the end of the term. This is best achieved with a multi-asset approach investing in a range of equities, fixed interest, property and potentially alternative assets, which shouldn’t all rise and fall in value together.
As they’re looking to save for a house and potentially to have a family, they should first focus on building cash savings using cash Isas. If they have children sooner they will have money that can be accessed easily without risking encashing investments at what might be the wrong time. It is positive that they are investing into a stocks and shares Isa, and once they have some cash savings can focus on this again. Because they have no investment experience a multi-asset approach would be suitable to help manage risk.
