Assess your finances before you invest long term - JN Fund Managers

Ainsley Whyte, head of sales and financial advisers at JN Fund Managers, recommends that before one invests for the long haul, they do an assessment of their finances to know how much money is available to invest.

“It is prudent to conduct a comprehensive financial-planning exercise, in consultation with a financial adviser registered with the Financial Services Commission, as an integral part of establishing and maintaining an investment portfolio,” he advised.

Whyte made the recommendation within the context of Financial Literacy Month being observed in April.

He suggests that everyone should first set aside an “emergency fund” ideally equal to at least 12 months of expenses and financial commitments. This fund should be saved in an account at a secure financial institution, such as JN Bank, that is easily accessible. He suggests that debt should be avoided, apart from loans for education, and purchasing a home or motor vehicle.

He recommended that investors consider the following:

KNOW YOUR GOAL AND TIMELINE

Everyone has different investment goals, such as retirement, paying for your children’s university education, and purchasing a home.

“No matter what the goal, the key to all long-term investing is understanding your timeline, or how many years before you need the money. Typically, long-term investing means three years or more, but there’s no firm definition. By understanding when you need the funds you’re investing, you will have a better sense of suitable investments to choose and how much risk you should take on,” he said.

PICK A STRATEGY AND STICK WITH IT

He noted that once you’ve established your investment goals and timelines, you should choose an investment strategy and stick with it until new information about the economy or financial markets become available. He added convincingly,“Don’t look at the portfolio each day or each week, as you will only observe the regular fluctuations in asset prices. Instead, schedule a quarterly or half-yearly review with your financial adviser to discuss the performance of the portfolio and any changes in your circumstances that could affect how your funds should be invested.”

UNDERSTAND YOUR TOLERANCE RISK

Each investor should try and understand their own attitude pertaining to the fluctuations in the prices of various assets. For example, although stocks historically have provided the highest risk-adjusted returns over the long term, the short-term record is much more variable. Consider that stock prices today are as much as 20 per cent below their highs prior to the advent of the COVID-19 pandemic. If you are not able to tolerate such fluctuations, then your portfolio should not be dominated by stocks, regardless of your age. “Your financial adviser can assist you in understanding your willingness and ability to accept the risks associated with different types of investments,” he informed.

DIVERSIFY FOR SUCCESSFUL INVESTMENT

The JN Fund Managers adviser says that spreading one’s portfolio across a variety of assets is essential to prevent the portfolio returns from being dominated by the investment performance of a few securities. Collective investment schemes, such as JN Mutual Funds, provide this essential investment strategy for all investors, regardless of their portfolio size. He noted that JN Mutual Funds and other collective investment schemes provide the advantage of easily building a well-diversified portfolio with exposure to may different individual stocks, bonds and other securities.

“Since the combination of investment objectives, financial risk tolerances and time horizons is unique for each investor, we encourage that investors consult with a qualified financial adviser,” said Whyte.“The members of my team of financial advisers at JN Fund Managers are always available to our existing members and clients and the public alike.”