We often highlight the benefits of lower fees at Netwealth, chiefly because, along with inflation, higher fees can have a very detrimental effect on your future returns. But unlike inflation – which you should factor into your projections, but can’t change – you can do something about the fees you pay.
Our head of client advisory, Matt Conradi, examines the range of fees that investors may face. You will not only learn about the breadth of fees you could be charged but you will also find out exactly how much you can save each year by paying around 1% less. It adds up to a significant sum pretty quickly.
Being diversified is another factor you can control, but while that premise is helpful to note in itself, it’s not enough. Having a mix of assets such as stocks, bonds and cash is important but crucially it must be the right mix to allow you to reach your goals. Further, you must decide exactly where you should allocate your funds towards each asset.
For example, should you consider investing in US companies or European? Plump for UK government bonds or riskier emerging market debt? Should you invest in some gold as a buffer if US tech stocks start to unravel? There is a lot to consider.
Actively managing these allocations is time consuming and can be tricky to master, but it’s part of what we do at Netwealth. While we naturally look ahead for the long term we must also adapt along the way, and frequently interrogate our short-term thinking, too.
We carried out this analysis recently to ensure we are well placed to face the challenges of potentially higher inflation and to reflect on the outlook for growth. Our head of portfolio management, Iain Barnes, explains the resulting changes here.
Along with these factors there is good evidence that spending time in the market, rather than trying to anticipate its undulations, is a worthwhile strategy. Likewise, you should never ignore the value of tax wrappers – such as ISAs and pensions – to give your investments a further meaningful boost.
Whatever decisions you make, whether you are thinking of changing course or merely making an adjustment, it’s best not to overcorrect. This can mean rashly selling or buying assets due to the behavioural biases we all face, but it can also lead you to change your risk level due to particular events or economic news.
The long-term ramifications of such a move can be profound. You can quite easily fall short of your goals as we illustrate here, so only under certain circumstances should you consider taking such action.
Nonetheless, the sum of all the investment and financial planning choices you make in life will significantly dictate your future comfort and freedom, so choose carefully.
As the last year has shown, it’s impossible to predict what could impede your financial progress. To ensure your path has as few obstacles as possible, it’s worth gaining a clearer picture of the various permutations that could affect your trajectory.
Please note, the value of your investments can go down as well as up.