Doctors Guide To Investing – The Deep Dive
Hello, this is Gemma at Clinic Alchemy, the Alchemist to give you great tips on how to manage and grow your wealth.
In the Vlogs to date I have spoken about investing, things to consider, wrappers to use, what I haven’t really done is tell you what to invest in.
‘What is going to me rich’!!! I hear you cry!
I don’t know the answer! No one does! That ironically is the beauty of investing!
The other reason I haven’t given you any tips on what to invest in is quite simply because I’m worried about giving you a little bit of information (5 minutes in fact) and then you go off and invest your hard earned wealth; you don’t review it, you make poor investment choices, you act emotionally and your investments do badly.
On the flip side if you gave me a 5 minute tutorial on your specialty would you be happy if I then went and did an operation on your patient?! Quite!
However when I speak to clients I do educate them on investments.
So today Doctors and Surgeons I’m not going to give you great tips on how to invest your money. I’m going to give you some education on the fundamentals of investments. A little bit of knowledge that will help you when it comes to making sound investment decisions going forward.
So here we go (by the way I warn you this is a bit dry…!)
There are 4 main asset classes that you can invest in:
- Fixed interest instruments. Most commonly referred to and government and corporate debt. i.e. gilts and bonds
- Gilts – are where you lend money to a government in return for some interest / income. A less stable country will have to offer higher returns to attract investors compared to stable economies.
- Corporate Bonds – are the same as Gilts, but instead of lending the money to governments, you are lending it to companies. So again the less stable the company the higher the interest you should expect to receive in return.
- Equities (stocks and shares). This is you buying a share / stake in a company.
- Property. It can be residential but usually it is commercial, investing in offices, factories, etc.,
- And finally Cash. Well I think we all know what cash is!
Other asset classes that people tend to invest in include Commodities such as gold, timber, oil and Foreign currency.
So now we know the main asset classes, which ones should we invest in….
Check out this table; (https://novelinvestor.com/asset-class-returns/
The table shows how different asset classes have performed since 2005. So where shall we put are hard earned cash? What asset class is going to make us rich?
Impossible to tell!
The key is to invest in a range of asset classes (known as diversification) to reduce volatility and losses. This is demonstrated by the white box AA.
Now, how much you invest in each asset class will come down to how much risk you are prepared to take on your money. As a rule of thumb equities and property tend to be more volatile / risky than fixed interest and cash.
Once you have decided on how much risk you are prepared to take you can then decide how much of your portfolio should be invested in each asset class.
You can then further diversify the portfolio by investing geographically around the world and in different industries.
So now we have the fundamentals of investment instruments we can now look to create a well-diversified portfolio.
This could be in direct shares, bonds etc and or it could be in funds that invest in these asset classes or it could be both.
Just remember if you are looking to manage your own portfolio, be prepared to invest a lot of time into it and do not make emotional decisions when making investments. If you are unsure seek advice.
Hopefully l have given you some clarity on investing. If you have any questions though feel free to comment or contact me direct on email@example.com
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