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Lifestyle Investment: A Way to Protect Your Wealth from Downfalls

Lifestyle Investment: A Way to Protect Your Wealth from Downfalls

When it comes to building an investment portfolio, you all emphasise asset allocation. It is a process of investing money in a wide range of assets that move independently to have meagre negative impact on your wealth in case any downturn happens. Well, it is a good concept to invest within and across assets, but it is not be-all-and-end-all. A good investment strategy does not just define asset allocation but it also involves a strategy to make your money work harder for you. You all are familiar about best investment in the UK, for instance, shares, bonds, property, and the like. To get your foot wet, you begin with shares and bonds, but it is not the way you think and you do. 

Throwing your money at shares, bonds and other assets may help you grow some money. Even though it contributes the slightest growth, it is better than having money idle in your savings account, which results in a significant drop in the value of your money. Investing is a process of buying and selling of financial products. Lifestyle investment comes in the role when you think about investment as a part of your life. 

For instance, you want to grow your money to live a better retirement life or you want to grow your money because you have a dream to open a restaurant or a mall. Lifestyle investment includes two phases: growth and defensive. The growth phase aims to grow your savings faster than inflation and the defensive phase aims to generate regular income as opposed to increasing the value of money over time. 

Lifestyle investing covers a big picture

Traditional investment planning used to focus on money management only, but lifestyle investing strategy aims to make your money work as per your lifestyle. It will require you to consult a financial advisor who will suggest you investment options as per your investment goals and current financial condition.

It does not just include money but also financial independence, security and above all peace of mind. While traditional investing approach would calculate only your risk tolerance capacity, lifestyle investing approach takes into account your priorities too. Unlike traditional investing strategy, lifestyle investing model is constructed around your priorities and needs. 

Growth investments

Various investment opportunities are out there that are segregated into two classes: growth investments and defensive investments. Growth investments help increase in the value of money. These investments in particular can withstand against the soaring inflation. However, note that they are subject to high risk. You will likely lose money due to an unexpected change in the market. Here are the types of growth investments you should consider to grow your money in value.

  • Shares

Buying shares enable you to get ownership in a company, thereby you will get a significant amount of dividend. It is a portion of profits that company generates in a year. The more the shares you buy, the more the dividend you will earn. In addition, you can make money by selling them when the prices of the shares go up. When it comes to investing in shares, it is crucial to be strategic and hold patience. 

The share market is extremely volatile. The prices fluctuate very soon. It is an ideal option when you are looking for long-term investment goals. Financial advisors suggest that you buy shares of different companies because it will help mitigate losses. Before you invest in shares, you should research carefully. If you are not familiar with how it works, consult an investment expert. They can help manage your money based on your risk tolerance capacity, goals and current financial condition. 

  • Property

Property investment includes all types of properties, for instance, residential, commercial and industrial. Property prices gradually grow and therefore you will be able to make money by selling them after a certain period. In the meantime, you can rent your property. It will serve as a fixed source of income. It will increase your money. Though property is not a depreciating asset, it does not mean that prices will always grow. They can remain static over a long period, making it harder to liquidate it. Other types of investments like shares are easy to sell, but it may take longer time to sell property. This is why it is not suitable to every investor.  

Defensive investments

Defensive investments do not aim to increase the value of your money. They rather generate regular income. Instead of directly jumping at growth investments, you should start with defensive investments. Defensive investments include fixed interest investments.

  • Fixed deposit

Fixed deposit is also a kind of saving, but you will get higher interest than your regular savings account. It means you have kept a certain amount of money with your bank with a condition that you will not withdraw that amount throughout the term. The length of fixed deposit can be one year, two years or five years. Remember that you will get no interest if you terminate it in the middle of the term. 

  • Bonds

Bonds are considered a secured investment because you will get a fixed rate of interest whether the company generates profits or not. Shares allow you to get ownership in a company while bonds allow you to become a creditor of the company. They are available in two forms: corporate bonds and government bonds. Investment experts suggest investing in bonds when your risk tolerance capacity is very low. 

Lifestyle investment is not a new type of financial product. It means investing in shares, bonds, mutual funds, property and other assets based on your needs and priorities. It is a more personalised model than traditional investing model that would emphasise risk tolerance and assets allocation. You should make an investment decision based on your investment goals and needs, not based on what others are doing. 

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