When it comes to intelligent investing, it is imperative to look beyond simply purchasing funds that track the FTSE 100. While this is a good starting point, it is crucial to ensure that your investment portfolio is well diversified in order to enhance its resilience and position it for growth. According to industry expert Charlotte Ransom, founder of Netwealth, the failure to broaden one’s investment horizon could result in missing out on the vast majority of potential returns from global equity markets.
With over 97 per cent of equity in companies worldwide available, it is evident that confining oneself to investing solely in UK companies would be a missed opportunity. The potential gains from investing in global markets, particularly in the US, are substantial – with the US S&P 500 index delivering around 220 per cent in total returns over the past decade.
So, where should one invest their inheritance? Property or pension? In terms of property investment, the current climate presents significant challenges due to high interest rates, increasing regulation, and fewer tax breaks for property investors. Additionally, the management and maintenance responsibilities associated with owning a property add another layer of complexity to this type of investment.
How then can one make their investments as efficient as possible? While some may choose a do-it-yourself approach and invest in index or tracker funds, it is important to consider the associated platform and fund costs. Furthermore, the time and effort required to continually balance investments over time could be substantial, particularly given the myriad of global economic and geopolitical events that impact investment decisions.
One effective method to ensure a cost-effective and globally diversified investment approach is to consider investing through tax-efficient avenues such as ISAs or pensions. By investing in a pension, individuals can benefit from a government boost and tax relief, particularly if they are higher rate taxpayers. On the other hand, ISAs allow investors to shield their investments from taxation and avoid paying tax on investment growth or income.
Ultimately, the key to maximising one’s inheritance lies in constructing a suitably diversified portfolio, consolidated at the right all-in cost. By taking a globally diversified approach, alongside utilising tax-efficient investment vehicles, individuals can significantly enhance the chances of protecting and growing their wealth in the long term.