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How’s best to invest: Navigating the path to long-term financial security

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By Jason White

There was a time when saving and investing for the future was considered a relatively uncomplicated affair, many steps removed from the intricacies of finance and global economics, but not anymore. Technological progress in recent decades has simplified many parts of our lives, but it has also brought more complexity, particularly in matters of personal finance. So what is the best path to long-term financial security nowadays? These five simple principles can help keep you on track:

1. Make sure you have sufficient reserves
All over the world, savers are enduring the lowest returns on cash for centuries, but many remain wary of stock markets, despite their recovery from 2009’s lows. Instead, they continue to accumulate cash, but disappointing rates are expected to endure and the eventual rise is likely to be slow and low, so those who wish to achieve meaningful returns may need to reassess their savings on deposit. Don’t deplete your reserves completely though; make sure you have enough to hand to cover any unforeseen emergencies.

2. Guard against inflation
The effects of inflation can be as severe as a sharp fall in markets. However, whereas market dips are usually followed by recoveries, inflation permanently reduces the value of your savings. While you should hold money on deposit for short-term needs, there is significant risk in trying to play safe by putting all your money into cash-like investments.

3. Invest for the longer term
The best chance of seeing inflation-beating returns comes from long-term investment in real assets such as equities. No one knows what will happen to share prices in the short term, but those who invest over a longer period—say five years or more—are likely to end up better off than they are today.

4. Diversify your investments
The old adage that investors should not put all their eggs in one basket still rings true. Shares, bonds and commercial property are examples of assets that can provide growth. Investing in funds rather than individual investments also ensures that money is more widely spread, and by investing in a selection of funds, investors will be better placed to withstand shifts in economic and financial conditions.

5. Find a financial manager you can trust
Different managers have different styles and assets, but many invest in the same way, so variety is no guarantee of diversity. There are no paths for investors that are risk-free and there probably never were. The key to building long-term wealth is a realistic assessment of needs and goals that reflects a level of risk that feels comfortable. It’s important to review your approach often and seek advice for peace of mind.

Contact Jason White of Parsons White Wealth Management, partner practice of St. James’s Place, on 9318 3705, email [email protected], or visit www.sjpp.asia/pwwm.

This article appears in The Best of Lantau 2017/ 18 annual guide. Read it online here or email [email protected] to request for your FREE copy.

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