When friends and family ask about my job, the most common question I get is “So what should I invest in?”… and I will always say “I think Blockbuster Video will bounce back any day now”.The truth is that “what should I invest in?” is an impossible question to answer without a clear idea of what the end-goal is.

 The best analogy I can give to this question is it is like walking into a train station and asking which train you should get on without giving a destination.

If you fancy trying this next time you travel feel free to give it a go, but if you end up in completely the wrong place do not go back and blame the poor conductor who sold you a ticket to Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch in Wales just because they liked the name.

The same is true for investments, for example if you are looking to protect the money you have set aside for your children’s education costs, then investing in highly volatile or inaccessible investments such as direct equities or an Enterprise Investment Scheme, is unlikely to be right investment for you. However, if your goal was to reduce the inheritance tax (IHT) liability you might leave your family on death then perhaps you would be willing to invest in more volatile and less accessible investments if they had preferential IHT treatment.

The above might be an overly simplistic example and it would be clear from outset that the client’s circumstances were different, but what about two clients of similar age and circumstance, who have the more generalised objective of ‘save for retirement’. They run the risk of being lumped together in a one-size fits all strategy that might not actually tie in with their timescales or expectations of what ‘retirement’ looks like to them. In a continuation of the train travel analogy, I wouldn’t ask for a ticket to England if I wanted to end up in London.

Retirement to you could be stopping work at 55, jumping on a boat and travelling the world and making the most of all the money you have spent your lifetime accumulating. To someone else it could be, going part-time at work between 60-65 before fully retiring, having a good holiday once a year but then passing down some of your wealth to future generations. Vague generic objectives can be as equally dangerous as having none.

This ability to state your financial objectives may sound simple enough but quite often this involves you putting dates and figures to events that are decades in the future that you might never have really thought about. Working with a financial planner to help you articulate these objectives, whether they be over the short-term, the long-term or the purely aspirational term will ensure that the answer to the question of ‘what should I invest in?’ is tied into where you actually want to go on your investment journey.

Get in touch

If you'd like to discuss any of the options discussed in this blog, please get in touch with a member of our Johnston Carmichael Wealth team.