How much of my wealth should I invest?

You may be wondering whether to save or invest your wealth, but the truth is, a robust financial plan requires a bit of both. Taking advice regarding your financial planning options is important. Knowing the importance of saving and the basics of investing will impact your decisions. Each option has merit and the ability to put you in a better financial position by making your money work harder – but in different ways. To give your wealth the best chance to grow, it's crucial to know your goals and evaluate any risks.  

Why save: Money saved in a bank account is easily accessible and deposits up to £85,000 are protected by the Financial Services Compensation Scheme (FSCS). High-interest savings accounts are one of the best ways to save money although, with interest rates at historic lows, they're not for everyone. One of the benefits of this strategy is that it ensures cash reserves are there when you need them and are accessible without delay. Do be aware, however, that if it's a fixed-term deposit account, your money is likely to be tied up for the agreed term. The primary benefit of saving is simply this: you can expect to get back what you saved, plus a little bit of interest, but of course your subsequent spending power based on that gain is dependent on the current rate of inflation.  

Why invest: Putting your money into a savings account is one of the best ways to save money if your main goal is to provide liquidity with ease. Those seeking larger returns will likely look at investment options. The opportunity of greater returns, though, comes with considerations of risk.  With thousands of different investment options, this long-term strategy has the potential to increase your wealth significantly and steadily over time. Many investors can end up losing money though, and investment success can depend on selecting the right investments and having a suitable strategy, but even then, market volatility can bring risks that can't be mitigated.

How much of my wealth should I invest? 

Identifying long-term goals and putting a suitable wealth management plan in place is a very good way to start your investment journey.  Advice should be taken as to how much of your wealth to invest. Investment approaches vary with the level of risk exposure and the expected return appropriate to your objectives and circumstances.  More cautious investors lean towards wealth preservation and therefore adopt lower risk investment strategies. Some investors are attracted to shorter-term investment opportunities but need to understand and acknowledge the risks involved.   

As a rule, cash savings should be sufficient to cover three to six months of all personal expenses, including insurance, mortgage payments and utility bills, as well as essentials. There should also be funds set aside for contingencies - emergency funds. Funding for short-term spending should always be savings-driven instead of investment-driven. Once you have set aside enough cash in savings to cover short term liquidity needs, you can consider allocating funds towards investment. 

There is no standard formula to determine the exact percentage to invest. Advice should be taken. Your circumstances, objectives, lifestyle, Income, age, risk tolerance and long-term goals should be factored into the decision too.  

How should I invest my money? 

Investing is a long-term strategy and options vary from lower-risk investments to high-risk opportunities with significant potential for return. Whether you choose to invest in stocks and shares, bonds, or property, it's essential to speak to an experienced adviser or wealth planner, who should take the time to understand the detail of circumstances, preferences and your long-term goals and work with you to set out your wealth management options in detail.  A wealth planner will be able to help you understand and visualise your cash flow needs over time so that you can plan to have enough money to sustain your chosen lifestyle. They can help you chose the most efficient way to invest your assets.

Arbuthnot Latham offers a discretionary service, in which our Investment Managers take time to understand our clients' aspirations, creating a bespoke investment plan that we manage on behalf of clients. This is different to an advisory service where individuals take advice from experts, but ultimately control their own portfolios.

What is wealth planning, and how can it help?  

Wealth planning takes an in-depth look at your business, family and/or personal financial needs.  The planner works with you to create and deploy a flexible and robust plan designed to help protect, grow, use and ultimately, pass on your wealth. 

The service that Arbuthnot Latham offers as part of its Wealth Planning proposition includes protecting wealth, retirement planning, estate planning and investment planning.

Arbuthnot Latham is a private bank and wealth manager. Our qualified and experienced advisors build a relationship of trust and understanding with you as we work together to design a flexible and unique wealth investment and management plan. 

Contact us today to find out more about our wealth planning or investment management offering.