Making money work hard for you

Görkem Barron, 17 August 2023

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Although interest rates have increased in recent months, with inflation as high as it is, having capital on cash deposits is likely to lead to disappointing long-term returns. Most people invest a portion of their savings in other assets to try to generate a better return.

There’s a huge range of investments opportunities available out there. Some people choose to buy property which they can rent out to tenants. Others invest in fine wine and art. Like most financial planners, we typically recommend that our clients invest in financial instruments like stocks & shares (equities), bonds, absolute return funds and commercial property.

Risk & reward in investments

All investments carry some degree of risk. It is important that all investors understand the relationship that exists between risk and reward. Investing in high-risk assets may mean a potentially higher reward, but with a greater risk of losing money. A low-risk investment will generally mean a lower reward but with a greater degree of security.

Most investors will usually blend different types of asset classes to create a diverse portfolio of holdings that they feel suits their attitude to risk.

Determining your risk tolerance

How much risk you should take usually depends on your:

  1. Attitude to risk - how do you feel about risk?
  2. Capacity for loss - how much risk you can afford to take?
  3. Investment horizon - how long is it going to stay invested?
  4. Investment objectives - what is it there for?

Typically, when you’re younger and/or the investment you’re going to make is a relatively small proportion of your overall wealth, it’s worth taking additional investment risk. This is because you have the time to ‘ride-out’ the inevitable ups and downs that come with stock market investments.

For example, someone who is aged 30 is not going to be able to access their pension fund until they’re 58 years of age adopted a higher risk investment strategy and investments went through a period where it lost say, 30% of its value. Whilst this is (of course) far less than ideal, the direct impact of this ‘loss’ on their day-to-day living is going to be negligible. The 30% loss, however, would impact someone who is 55 years of age and looking to retire in the next 5 years.

It’s therefore vital to gradually reduce the level of risk of the portfolio as you get closer to the time you’re going to require an income or capital from it and/or when the portfolio is at a size where it is a meaningful proportion of your overall wealth.

We would expect clients to have a minimum 5-year investment horizon. If the investor is likely to require the capital that is in the portfolio within 5 years, our advice in most cases would be to not invest. This is because if such investments were to lose money, it would have a direct impact on the objective for which you were saving.

The role of stocks & shares ISAs and pensions

Most individuals would use Stocks & Shares ISAs and Personal Pensions or workplace pensions in the first instance to actively save for the future.

Auto-enrolment rules state that the minimum contribution rate is 8% of qualifying earnings of which at least 3% must be paid by the employer.

Generally speaking, a contribution of 8% will not be sufficient for most individuals to sustain their current lifestyle in retirement and you should therefore consider increasing your pension contributions. Whilst it may not be feasible to ‘lock-away’ a bigger proportion of your income into a pension which is not accessible until you reach 57, it is possible to use other products such as Stocks & Shares ISAs as part of your ‘retirement fund’. The ISAs could be used to generate an income at retirement, however they would also be accessible in case you needed the money earlier for other purposes.

How can we help?

It's important to get into a savings habit as early as possible and have an active strategy in place which is reviewed on a regular basis to ensure that your money is working hard for you. If you would like to have a confidential conversation, please get in touch with our Chartered Financial Planner, Gorkem Barron ( or Director, Andrew Tricker (

*DisclaimerLubbock Fine Wealth Management LLP is authorised and regulated by the Financial Conduct Authority (FCA). The value of investments may go down as well as up and you might not get back as much as you originally invested. None of the content of this presentation should be taken as a recommendation and you should always seek professional advice before taking any actions.