Where should I invest my money?
When someone finds out I am a financial journalist, this is usually the first question that I get asked and I mentioned last month that often this leads to stories of inappropriate investments. It is very easy to forget that the majority of investments undertaken by individuals prove to be very successful and meet their needs over a long period of time. It is only the minority of unsuitable schemes that usually make it into the papers.
So what does a normal, suitable, appropriate investment look like? The answer is surprisingly simple, although I will go into a little more detail below. The right investment is one that you understand, and will do what you expect and meet your needs. This approach has never let me or any of my clients down.
Lets say your immediate need is to save a deposit for a property. You need something secure, that invariably means cash-based investing. You would like to get some interest and for the money to be available when you need it. A basic savings account is probably what you would arrange yourself and you most likely wouldn’t be persuaded that something else more expensive and complex was right for you.
Because of the way the finance industry uses jargon and complexity, few of us have really engaged with trying to understand these terms and products until the point at which we need them. In contrast, the basic savings account is something that we have learned to understand from a very young age.
Usually, trying to work out how to do something at the last minute is not ideal, which is perhaps why so many people seek advice on their finances and rely on advisers to guide them. In many developed economies or markets, regulation has developed over 30 or 40 years because of the scandals and “Ponzi” schemes that have been uncovered. This generally ensures that minimum standards apply, although unfortunately for many of us based offshore, we have found that a lack of regulation has led to some unsuitable products being promoted.
So the challenge for us living offshore is actually how we keep our money safe as well as finding the right investment, which is what is usually meant when I’m asked the question ‘where should I invest my money’.
This is the real challenge because the starting point for any investment is where it is held, or what is known as “custody” – who keeps hold of the investment or the record of it. In the US and EU, the most common form of custody for retail investors is an investment platform. This usually provides online access to view your investments in real time as well as some basic research and planning tools. Additionally, the best platforms offer discounted investment funds, model portfolios and risk assessment.
Why use a platform? Well, I like the idea that my investments are held separately by a regulated firm in a highly-regulated jurisdiction and overseen by a regulated financial adviser. That’s the approach that I take, having my pension trustee based in Gibraltar, although the administration is actually in the UK and the firm is also UK-regulated. Does it cost extra to have a regulated firm look after my affairs? Well, I find that the opposite is the case. The transparency of competition in regulated markets seems to bring costs down in contrast to the opaque, murky nature of some offshore investing.
Although I am well versed in financial matters, I actually have my investments managed on an ‘advisory basis’ by the firm that looks after my affairs. They charge a monthly fee directly to my pension for recommending and monitoring the investment funds, rebalancing the portfolio and providing a pro-active advice service. I can pick up the phone, send them an email with any queries and I meet with them at least once a year either in the UK or in Thailand.
Is this the answer that you expected – for many readers who ask the question are surprised with the answer? Most believe that I have sure-fire investment ideas or that I am engrossed in the analysts’ reports that help me to manage my investments myself online in a trading account.
The truth is that I have the knowledge and experience to know the limits of my competence and when to take advice. And, of course, I would rather that someone else has the worry of how the investments are performing and that everything is safe.