Source: Numis Securities, Citywire, Netwealth. Based on an illustrative return of 5.3%, gross of fees, and assuming average all-in charges of 1.82% for Traditional Wealth Managers (Numis findings) and 0.7% for Netwealth.
Please note that forward looking models are not a reliable indicator of future performance.
Playing it too safe
Being prudent is one thing, and often recommended when investing – but being too cautious when investing can be quite damaging, as this feature explains.
In a nutshell, the article highlights the dangers of holding too much of our wealth in a bank account or cash ISA. Cash is, of course, essential for everyday expenses and for emergencies like cover for times of unemployment or when we have no income. Yet while holding more cash than we need may seem safe, the dangers of inflation are persistent, and being underinvested can have a dramatic impact on the value of our wealth over the long term.
The sensible answer for many investors is to set aside enough cash for everyday expenses and emergencies and to have a widely diversified portfolio to diminish the risks of one asset class alone.
Thinking we know it all, or know more than enough
Because we don’t always behave rationally by nature, by extension we also have a tendency to behave irrationally with our money. Sometimes this has little obvious effect, but over time – especially with inertia and overconfidence as described above – this behaviour can have a drastic impact on our finances.
This article highlights the common biases which can take hold. And while there is little we can do to prevent their intrusion, being mindful of their consequences can help us to take action to mitigate their effects.
Not making the most of tax wrappers
Putting money away regularly for a future goal makes sense, but it’s best to shelter our investments as much as possible from tax. It’s easy to forget to use our ISA and pension allowances to the full – especially during the end of tax year rush – but making the most of available tax wrappers can significantly impact our wealth as we can see here.
Need help with a successful investment approach?
As we have shown, there are numerous traps that even knowledgeable investors can overlook when investing. A modern wealth manager like Netwealth can help you overcome the many obstacles and be better prepared for the future – please get in touch email@example.com.
Please remember that when investing your capital is at risk.
1 Source: Dalbar Associates - https://svwealth.com/wp-content/uploads/2018/04/dalbar_study.pdf