Investment planning is about deciding what to invest in in each of your accounts.

Allocating to different investment sectors

Different investment sectors such as equities (shares) and bonds provide different investment return characteristics and can perform differently in different investment conditions.

Example portfolio asset allocation (%)

Short dated bonds: provide liquidity and stabilise the portfolios overall value

High yield bonds: higher yielding hybrid capital securities issued by blue chip companies; generate income and predictable returns, generally with less volatility than equities.

Alternatives: alternative ways to generate income, such as property infrastructure or actively managed mixed asset funds, ideally uncorrelated to equities

Equity income: to generate long term increasing income from the shares of companies paying higher dividends; comes with volatility

Equity growth: to generate long term capital gains from shares in faster growing companies; comes with volatility

Deciding how to invest in each sector

Having decided which sectors you want to invest in, you then need to look at how you will invest and this will be different in different sectors.

  • Individual securities or collective funds
  • Passive tracking funds or actively managed funds
  • Types of collective funds to use: ETFs, Investments trusts or open-ended funds (OEICs)

Overall investment planning needs to address:

  • Your investment objectives such as income requirements or one-off withdrawals
  • Investment time horizons, how long will you likely be invested for
  • Your financial capacity to be able to absorb losses, short and longer term
  • Your personal capacity to deal with any losses short or longer term.