Working Out Your Investment Objectives

Your financial plan will be based on your goals, your risk profile and your current financial situation which together determine your investment objectives. Here we look at some common objectives and the type of portfolio that might suit. But first, a word about risk!

The link between risk and reward

All investment involves risk. Generally speaking, the more risk you take, the greater the potential for gain but the opposite is also true – you could end up losing big. It is important that you work out your risk tolerance so that you are investing with that in mind.

It can be hard to understand the level of risk that you can afford to take, and this is where the guidance of a professional financial planner can be invaluable. They have sophisticated profiling tools which will take the guesswork out of the process.

Seven basics on investment risk:

The higher the expected rate of return, the greater the risk
High returns are not possible with little or no risk – if someone promises this, it’s best to give them a wide berth!
When it comes to investment, past success is no guarantee of future performance
The younger you are, the more risk you can afford to take as you have a long time to recoup losses
Markets are volatile – investments will go up and down and this is something you will have to accept as part of the investment process
For most investors looking to save for retirement, buy and hold is the most appropriate strategy
Timing the markets is very difficult to do and to be avoided unless you can afford to lose your money

Risk and investment objectives

Below we look at some of the common investment objectives that our clients have and the best portfolio options for them. Infinity is proud to be the sole partner in Asia of Tilney, one of the world’s leading investment management firms based in the UK with a solid pedigree and assets under management of £65billion. They offer a range of investment funds to fit all investment profiles and we have recommended which of these is suitable in the following scenarios.

You want to preserve capital while generating income

With inflation on the rise, capital preservation requires investing to ensure that percentage return outstrips the current inflation rate. With interest rates still extremely low, this can’t be done by saving in the bank. Opt instead for a defensive fund which delivers a real return over the long term, beating cash while minimising the risk of capital loss. It is the most conservative investment type and is often adopted by those close to retirement.

Tilney’s Defensive Fund fits the bill while their Conservative Fund also delivers modest capital growth over the longer term whilst maintaining low volatility. The latter carries a slightly higher level of risk but with the potential for a higher return.

You want an income with modest capital growth

If your primary goal is generating current income but you also wish to achieve moderate capital growth, Tilney’s Income or Cautious funds are the ones to consider. The Income fund is riskier than the Cautious Fund but has the potential to give you higher returns.

You want to balance income and long-term capital growth

Tilney’s Balanced fund aims to deliver both investment return of income and capital growth over the longer term. The Fund adopts a moderate risk approach but carries more risk than the Income portfolio with a commensurate increase in potential return.

Growth is more important to you than income

If your principal objective is to achieve high long-term growth and capital appreciation with little emphasis on generating current income, Tilney’s Growth and Adventurous funds both aim to deliver an investment return of capital growth over the long term. The Adventurous fund takes a higher risk approach than the Growth fund with a corresponding increase in potential for return.

You want maximum capital appreciation

If aggressive growth is your primary goal, you might want to consider Tilney’s Maximum Growth fund, which aims to deliver an investment return of capital growth over the long term. The level of risk is high, but this also means it has the potential to give you higher returns. This is not for you if you have a short investment timeframe or if you are looking for current income generation.

You want to invest sustainably while minimising risk

The good news is that the ESG (Environmental, Social and Governance) sector has exploded in recent years and ethical investing no longer means sacrificing return. Adopting a low to moderate risk approach, Tilney’s Sustainable Cautious fund is aimed at long term investors seeking capital growth via a multi-asset portfolio of investments with sustainable credentials.

You want to invest sustainably and can shoulder some risk

Long term investors with a higher risk tolerance and a desire to invest ethically should consider the Sustainable Adventurous fund which also aims to deliver capital growth via sustainable investments but adopts a moderate to higher risk approach.

For assistance with working out your investment objectives and your tolerance to risk, why not contact one of our professional financial planners? Our team, based in offices across Asia, have a wealth of experience of working with local and expatriate investors and dealing with complicated cross-border considerations. Whatever your goals, they can put a long-term financial plan in place to achieve them. Get in touch today.