One of the most significant risks when investing in your life, is not necessarily the investment itself. It’s you.
Let us explain.
The biggest risk when it comes to wealth creation is you
You may think that the biggest risk to your lifestyle is the performance of one of: your investments, the economy, the business that employs you. However, all of these things will go up and down from time to time depending on market conditions (this is what we call volatility). And yes it’s when they go down that you may be at risk. It’s not the performance that’s the problem, it’s your financial position at that point that matters.
Some people find themselves selling assets when this happens. Selling due to market and financial pressures means you may make a loss. If you hang onto the asset until it inevitably goes back up in value, you won’t lose money.
How to manage the risks
There are several ways to ensure this doesn’t happen:
- Don’t overstretch your finances. If you have borrowed too much money, there may be times that you struggle to pay for the investment. What you can borrow is not necessarily what you should actually borrow. It is essential to seek advice from a professional that knows how to understand your financial circumstances and gives enough rope for you to experience changes in your expenses and living arrangements without affecting affordability.
- Protect your cash flow (and lifestyle). Insurance is critical when taking out a loan. It will protect you against significant life changes and help ensure that you are in a position to maximise your investment even when things go pear-shaped.
- Reduce your volatility. Take on investments and advice from people that consider risk and your appetite for it. Many investors only consider returns whereas a successful portfolio is a careful balance between the two “R’s” – Risk and Return.
We cover the above by providing the right advice and including the right professionals in the process of recommending anything at to you. We have partnered with a personal insurance expert to provide you with feedback and an insurance appraisal if appropriate. Consider it your insurance health check.
They can offer you:
- Telephone insurance appraisal where they look at your current insurance position and provide feedback and potential improvements (if any).
- Discount by way of a cash rebate for active applicants.
So, lets ‘ensure’ that you can continue to pay for the investment under any circumstances.
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