20_20_newsize08 21/11/07 22:38 Page 43
Your Questions
ANSWERED
I’ve inherited a lump
sum of £750,000
by GORDON BENNIE,
How can I decide what to do with it?
MARKETING DIRECTOR,
Oracle Financial Services
Firstly, make some decisions about your life; or rather what unduly should you wish to make amendments.
effect this money will have on your life. Likely as not your Risk seems obvious; it is something that most people are
decisions will focus on the future, and that’s always a great worried about as it can represent loss. However it can also
subject to consider when you’re feeling financially confident! be used to produce gain and a good financial adviser will be
looking at various methods of reducing the overall risk in a
For example you might use the money to retire earlier than portfolio by balancing a higher risk area of your portfolio with
you expected, you could choose to repay your mortgage, to lower risk options.
supplement your income, or you may wish to keep your life
exactly the same and save the money for a rainy day. This is diversification, and the old adage that you don’t keep
Chances are for most people it will be a combination of all your eggs in one basket is particularly relevant in
these factors that will influence and ultimately shape their investment markets. If investors spread their capital between
future path. investment sectors, or asset classes, especially those that
perform differently in particular economic conditions, they
When you have decided on the new direction of your life, reduce the overall level of exposure to risk in their portfolio.
you are ready to look for some professional financial advice.
The Oxford English Dictionary describes advice as ‘guidance As a rough rule of thumb a moderate risk investor should
or recommendations offered with regard to future action’. invest no more than half of their wealth in the equity sector,
The world becomes more complex every day, and with a within which they should diversify further across
myriad of financial products from which to choose, few of us geographical regions, and various different fund styles.
have the time and the knowledge to research and manage
all of our financial affairs. However, I believe that multi asset class funds are a great
choice for a new investor. Within such funds the manager
Once you have selected an adviser you will need to clearly will make decisions about which of the major asset classes
state your goals, your investment experience and the he and his team believe will perform best and weight the
parameters within which you would like your money to work portfolio accordingly, with the ability to make changes quite
for you. quickly. This often means that the fund will be more diverse
as it may also include some ‘fringe’ investments (such as
If you are a low risk investor you need to be prepared for hedge funds, private equity or even gold), which might not
relatively low growth, if you have a longer time frame or a typically be accessible in a portfolio of this size.
higher risk tolerance, you could aim for higher overall
returns. In my experience, most people tend to fall into the As the tenth anniversary draws closer your adviser may start
moderate risk category, where they don’t want to feel too to reduce the risk in the portfolio to reflect the need to avoid
much risk to their money, but when investing appreciate that fluctuations in value. If at the tenth anniversary the capital is
some risk is needed to generate returns. to be used to provide income in retirement (as in this case)
the portfolio balance can be shifted from growth to income,
So what should you, a moderate risk investor do if you wish and your goal is reached!
to retire at 60, have a ten year time frame and no
mortgage? You’re probably wondering how much income the
inheritance could provide? In a diverse portfolio I estimate
Flexibility and risk are two of the most important concepts in (using a portfolio planning tool and conservative growth
financial advice. rates) that the £750,000 could have become £1,200,000
over the ten year period, which would produce income of
Flexibility is tremendously important, as most people’s lives £60,000 at a 5% withdrawal level (of course if the capital is
change quite dramatically from time to time – remember to be depleted this figure could be higher).
you’ve just inherited a large sum of money if you want an
example! The products and services you consider must be Lastly, enjoy the increased financial security that your
flexible enough to change with you and not penalise you inheritance has brought you!
20/20 forty two
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68