Once you have created your wealth, you are likely to want to make sure that your assets last your lifetime to make sure you can maintain your current standard of living. You also want to make sure that some of the wealth you have worked so hard for can be left to your loved ones to help them achieve their financial goals.
A long-term issue is the erosion of the buying power of your assets due to inflation. Inflation generally rises each year which means your wealth will be worth less each year. For example, if inflation rises by 2%, your wealth will be worth 2% less.
For example, £100 in 2014 would cost £181 in 2044 if inflation stayed at 2% per year. Therefore it is important to ensure that your assets secure and aim to grow them faster than 2% per year to make sure your income and capital can keep up with inflation.
Should I keep my wealth in cash?
Your Financial Adviser at Four Wealth Management will work with you to determine how much of your assets need to be easily available for emergencies. Many people keep their emergency fund in cash or in a Cash ISA that can be accessed when needed. However, keeping more than your emergency fund in cash can be potentially detrimental to your finances over the long term as due to inflation, the value of your cash assets will go down.
Can investing in property help to preserve wealth?
Our Financial Advisers often speak to clients who are considering in investing in property.
Residential property values usually stay in line with wages, and wages track inflation. This means that house prices do generally increase over the long term but there is still the risk of a property market crash. Generally, inflation will increase house prices which helps to protect your assets but is unlikely to grow your assets more than the rate of inflation so property is likely to only preserve your assets. However, investing in property has additional costs. You will need to dedicate a lot of time to manage a property portfolio as well as have cash reserves to fund repairs and maintenance which could mean the costs of keeping the property may outweigh any potential income. There are also multiple tax implications and stamp duty to consider when buying more than one property.
The wealthier you are, the more of an issue inflation becomes. Residential property can be a way to store your wealth as there is generally a long term upward value trend but it is unlikely to provide you with significant increases in your wealth. Illiquidity is another primary issue with investing in property, if your situation changes and you need to access your assets quickly you will not be able to as selling a property is a time consuming and costly process.
Will stock market investments preserve my wealth better than property?
Investing in the stock market can offer greater returns on your assets and growth over the long term. While the stock market is known to be volatile during times of uncertainty, historically markets have recovered and investors do achieve returns.
If your aim is to preserve your wealth and you have a low risk appetite, a Financial Adviser at Four Wealth Management can work with you to understand your overall objectives and select a portfolio that will help you to achieve your financial aims. A Financial Adviser will ensure your investments are diversified to reduce risk and the portfolio will be continually monitored against your objectives and adjusted where necessary.
Find out more about investment planning
Book a no-obligation meeting
To discuss preserving your assets, contact us to book a no-obligation financial review meeting with a financial adviser or phone 0117 973 0500. The review will last approximately one hour and can be a telephone meeting. Alternatively, the meeting can be at one of our offices in Bristol, London or Cirencester or at your home address.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than invested.
Investing in real asset classes (equities, corporate bonds and commercial property) does not provide the security of capital which is characteristic of a deposit account with a bank, building society or Cash ISA. The value of capital and income from it can fall as well as rise and you may not get back the original amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
