We have introduced the Liquid Reserves portfolio to offer a higher yield and lower risk option to investors who wish to take advantage of the current high interest environment. The portfolio offers compelling returns now, but you should also think about how to make the most of your money in the long term to achieve your future goals.
What is Liquid Reserves?
The Liquid Reserves portfolio lets investors benefit from a higher interest environment with the lowest risk portfolio we offer. While it is lower risk, the returns are compelling – with a current gross yield of 5.3% a year for GBP portfolios.
The portfolio is comprised of low-risk money market funds and ultra-short-term bonds. Money market funds offer returns similar to bank account deposits by investing in a diversified pool of high quality and short-term fixed income securities (such as bonds). Many bank deposit returns now are the highest they have been in years and this is reflected in our yield.
The underlying assets are issued by governments, banks and other companies with very strong balance sheets and high credit ratings. They offer very predictable returns, in line with interest rates. In this way, they aim to deliver a combination of capital preservation, diversification, liquidity and yield.
Please note, while the Liquid Reserves portfolio may be a suitable option in the short term, we believe that most investors with a long-term outlook should consider a higher risk portfolio to help them meaningfully outpace inflation and grow their assets over time.
Tax-free benefits and much more
Unlike a regular bank account, the Liquid Reserves portfolio is a full-service account that lets you invest through an ISA or pension – allowing you to benefit from tax-free growth and our other service support around contributions, withdrawals and transfers.
It’s easy to transfer your funds at any stage to any of our other portfolios if you would like to take more risk to improve the potential of reaching your goals. Other advantages include:
Managed by experts – the same experienced team of investors manages the portfolio, with the same diligence we apply to all other Netwealth portfolios.
No lock-in period – you can access your money any time without having to sign up for a fixed one-year period or similar.
Low volatility – while the returns may fluctuate slightly you won’t experience the same level of volatility compared to investing in the stock market.
High quality short-term assets – feel reassured as the portfolio only invests in high quality government, bank and company assets.
Qualified advisers available – our team of financial advisers are on hand if you need to evaluate your financial goals or reassess your plans for the future.
Ideal as a shorter-term solution, or if you prefer less risk
Because the assets in the Liquid Reserves portfolio deliver returns that are in line with interest rates, they are affected by the Bank of England base rate. Sooner or later – perhaps within the next 18 months, but maybe sooner – interest rates will come down. Therefore, investors should decide whether this kind of lower risk portfolio is appropriate for their circumstances. Are you doing enough to reach your long-term goals?
In general, when investors take more risk they access the potential of higher returns – a relationship that has been typically shown to work over longer time periods. More risk helps you to meaningfully outpace inflation, which can significantly erode the real value of your savings and which bank savings accounts do not usually combat effectively.
The term ‘risk’ shouldn’t be viewed in the negative when it comes to investing. You can frame it as risk over time. Investing over a day or a month can be a volatile experience, but the longer you invest the more these fluctuations tend to be smoothed out. So if you have goals you want to achieve in 10 years or more (such as saving for retirement or other major commitments), taking more risk may be suitable to grow your pot and counter the effects of inflation.
To get a clearer idea of what we mean – and how different levels of risk have different potential outcomes – check out our free powerful online tools at MyNetwealth. These let you anticipate different investment scenarios and outcomes by changing multiple permutations such as sum invested, timeframe, risk level and inflation assumptions. You can clearly see the benefit of a higher risk level versus a lower risk level if you have time on your side.
As always, you should think about what your objectives are for your money. Determining how soon you might need it, and for what purpose, will help you evaluate how much risk you should take now and in future.
Find out more about managing your money effectively
If you are unsure about risk or any aspect of planning for your future, one of our professional advisers can help you refine your financial plan or advise on a wide range of scenarios where advice could be valuable, such as those we outline here. For a free consultation please get in touch.
Meanwhile, you can find out more about the Liquid Reserves portfolio (including FAQs and how to open an account), by visiting the Liquid Reserves portfolio page.
Please note, the value of your investments can go down as well as up.
Netwealth offers advice restricted to our services and does not provide independent advice across the market. We do not offer advice in relation to tax compliance, personal recommendations with regards to insurance and protection, or advise upon the transfer of defined benefit pensions.
This offering is considered low-risk, however the value of your investment may still fluctuate.