An investment case study

Robert and Penny have had some historically poor experiences of investing their money.

Their previous adviser was very keen on what might be considered the more esoteric types of investment product.

Some structured products, a VCT and a some quite racy equity investments resulted in capital losses over a period of time.

Both Richard and Penny would describe themselves as “cautious investors” and the capital with which they were left needed to work hard for them because both of them are now retired and they need extra income.

We spent time with them establishing their attitude towards risk, reward and volatility and in particular their tolerance for loss.

Actually that last part was quite straight forward because whilst they understood that the value of investments can go down as well as up, that didn’t mean to say they would enjoy any kind of roller coaster ride.

One of the most important things that we have learned is that our clients are more concerned about avoiding the worst of any investment market downturns than they are about chasing the upside.

We constructed for them a low risk portfolio that was designed to do two things; first of all to generate a reasonable level of income and secondly to preserve capital value. This was done back in June 2010.

As well as providing an annual face to face review service we sense checked what was happening in their portfolio on a quarter by quarter basis.

This is of course over a short time frame in the context of investment portfolios but a 3.46% capital gain on a portfolio that is generating an income yield of 1.88% certainly has kept both Robert and Penny happy.

Robert said “My biggest concern now is inflation but at least we have both been able to sleep at night knowing that rather than an entirely equity based portfolio we now had a nicely diverse investment pot that was generating reasonable income for us”.

Would you like to find out more about our investment advice process for clients? Do get in touch to arrange a meeting with an Informed Choice Financial Planner.