Phased Investment Planning

This page details all the relevant components of Phased Investment Planning.  Please read through below or click on the headings as required.

Charges
Geographical Diversification
Asset Diversification
Volatility Rating
Asset Correlation
Phased Investment Strategy
Target Funding

Charges

This contract will have all of the investor's monies going into the selected funds from day one.  There is no charge whatsoever on the contribution and your money is working from the first day of investment. 

The annual management charge is 1.75% and may be slightly more expensive depending on the funds that are chosen.  We are suggesting a high level of diversification so the charges will average out at less than 2%. 

There is no exit penalty and clients can cease contributions, increase or decrease contributions or totally withdraw the funds at any time.
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Geographical Diversification

The different world economies will behave independently at different times and it is very important to have exposure within your investment portfolio to the established regions and to take a smaller percentage play in the perceived developing nations.  Depending on the fund manager or the fund itself you can gain exposure to the different regions but it is very important to clarify this and not have any overlaps  i.e. holding a number of similar funds with different fund managers can often lead to duplication.  It is important to target the desired regions and be clear on how you are going to access them through your fund choices.
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Asset Diversification

To further reduce your risk it is very important to invest your monies across a broad range of asset classes.  The main areas are of course equities, property, cash & bonds (government or corporate).  More recently you can invest in diversified commodity funds or access individual commodities e.g. gold, oil, grains etc.  There are also opportunities to
invest in new green energies such as wind, water & solar options.  There is also access to a currency trading fund which has produced consistent returns.

Combining geographical locations and asset diversification allows you access to growth but in itself reduces your risk exposure. 
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Volatility Rating

All fund managers will apply a volatility/risk rating on their various offerings.  These should be factored in to your fund choice in addition to the above to ensure you are not exposing yourself and taking on too much risk.  The volatility rating should be carefully considered and assessed as what was very apparent most recently is the behaviour of some of the funds in the recent crisis that were classified as “safe”.  A lot of fund managers have re-rated their funds in the light of their behaviour over the last 30 months.  The exceptional circumstances have tested the supposed “safe funds” and in actual fact some of these funds behaved as they would have done with a higher volatility rating.

A very important point here also is that investors themselves have now re-thought their risk tolerance due to the volatile market and in many instances were a lot more risk averse than they originally concluded.  This needs to be given consideration from your own point of view when looking at different funds and in the overall context of your portfolio.
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Asset Correlation

There are a number of asset classes available which will behave independently and these need to be factored in to the equation.  An example would be a currency fund versus an equity fund.  Neither of these funds are connected to each other and can both rise in value at the same time, fall in value at the same time or rise and fall at different times.  In other words if the stock market is down there are assets that may rise because of that or behave the way they will behave oblivious to that fact.  This is another layer of investment consideration that should be built into the equation.
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Phased Investment Strategy

A significant number of investors put their money into the market and pick a particular time to do this.  They also follow the great “new idea” and invest in this in their hoards.  This type of investing has caused people some serious problems in light of the recent market falls.  It is very important that you phase in your investments over a period of time and that you do not buy your units altogether.  This method has shown in the past that it can provide steadier returns for the investor over a longer period.  Even in falling markets if you persevere with buying your units you are getting more for your money and provided the fundamental fund choice is correct from day one the assets will recover in value and your fund value will be boosted having bought significant numbers of cheaper units.  It is possible to cater for single contribution amounts but these should go to Cash and be phased into the chosen funds over an agreed period of time.
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Target Funding

Finally it is important to have a plan and a goal that you would like to achieve in relation to your phased investment plan.  This may take the form of a percentage growth that you would achieve each year or a monetary amount in your fund at a chosen maturity date.  By working closely with your advisor these targets need to be assessed on an ongoing basis to ensure that things are on track.  It is very important to have a focus and these targets should play a large part in your review meetings.

What I would propose is that we meet on a quarterly basis and re-evaluate all of the above structures to monitor their progress.  It is very important to have your plan funding in your sights on a regular basis so that you are conscious of its progress.  We will undertake to send you out a monthly statement.
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