Good to Great: How to Scale With an Outsourced CFO

At any stage of life, the ultimate goal of investment is to minimise risk and maximise return. Right? 'I suppose, but it's easier said than done.', you counter––after all, how can anyone predict their future circumstances?

An optimal place to begin is with a risk profile that can potentially determine your portfolio's active investment asset allocation. If you're keen to get started, look at how you can mitigate potential risks and threats with guided wealth-building guidance from Altus. 

From here, we'll give you a brief guide on managing your asset allocation in line with your life stage.

 

Risky Business: Identify Your Risk Profile

A risk profile will evaluate your willingness (or, likewise, your aversion) alongside your capacity to take risks. 

It can be hard to put the idea of risk tolerance into place, so let's use this analogy. When driving down the motorway, do you speed ahead in the right lane, aware of the consequences but willing to go for the ride? Or do you sit comfortably on the left, knowing that's where you want to sit while you ride it out? Risk tolerance gives your advisor an understanding of what types of investments could suit you based on your attitude to risk. 

It's important to note that willingness and ability to take risks may not always coincide. Whilst individuals may have a higher capacity for risk, they may naturally be conservative and lack the willingness. 

 

Is Time of The Essence?

Your investment horizon is the length of time you, as an investor, are willing to hold on to your portfolio. For example, suppose you are in your early thirties and work as a project manager. You have stable employment and are considering planning for retirement. In that case, you will be more inclined to take a greater risk, knowing that any short-term volatility may smooth out over such an extended period giving you a greater chance of achieving your long-term investment goals. 

 

The Asset Allocation Life Cycle

We pass our life through various stages, or more fondly, milestones. For maximum benefit, your investment portfolio should age with you. Perhaps, you are a young family. Or looking to start a new business, or you may be at the other end of life and preparing for retirement. Whatever the stage, it is always factored in when powering up your portfolio.

 

Stage 1: Early Income and Career Onset 

With beginning investors, there is potentially room for higher risk. They are just starting in life armed with an income that is most likely void of the added responsibilities that a mortgage and young family might bring. 

However, what is essential during this stage is financial independence. You want to avoid unnecessary debt, develop a sustainable budget and have a stream of income that caters to recurring expenses. Got some cash to spare post-payday? Then you're good to go!

 

Stage 2: Pitter Patter of Little Feet? Family Dependant 

Expenses will likely increase during this stage, meaning financial commitments will change investment objectives. You might consider this a capital appreciation period that sees long-term growth as your priority rather than the current income from the investment.

 

Stage 3: Growth and Consolidation 

Although moderately high risk is adopted during this phase, you should also consider capital preservation. 

 

Stage 4: Retirement 

At the retirement stage, your investment timeline is a lot shorter. Not only does the amount of risk you're willing to take decrease, but there is also the potential to utilise some of your assets to enjoy your retirement.

 

Stage 5: Gifting 

When you reach a certain point in life, especially post-retirement, you may find more than enough funds to meet any current or future expenses. As a result, you may look to gift a portion of your funds, perhaps to grandchildren, charitable organisations, or whomever you deem fit. Doing so can reduce your income tax and leave you some cash to trade.

 

Asset Allocation: Minimise Risk, Maximise Return

Investment––is a lifelong process that not only changes with every stage of life but also depends on the fact that everybody lives their life differently. Over the years, your investments have the potential to grow and build a wealth that could ultimately give you access to new opportunities.

Working with the knowledge and experience of Altus, you have the power to create a diversified investment portfolio that carries the specific level of risk you're comfortable with alongside the types of investments that appeal to you. If you need help with asset allocation, don’t hesitate to reach out.