- Long-term investor with earned income
- Middle stages of accumulating wealth
- Investable savings worth between £51k and £250k
Once your investment portfolio is worth over £50,000 managing it and watching it grow gets really satisfying and interesting. It’s important to maintain your discipline and stick to an asset allocation strategy and avoid buying too many holdings willy-nilly – you don’t want your portfolio to end up looking like a rag and bone man’s yard!
You may have inherited money, received a bonus from work, had a redundancy or a divorce settlement, taken a lump sum from a defined-benefit pension scheme, or even won money. If any of these situations apply to you then, depending on your age and the size and source of your regular income, you might want to consult some of our lifestyle asset allocation models. These may be more appropriate in terms of your needs and the risks you are prepared to take.
We are assuming this strategic asset allocation is for a long-term investor with an earned income that takes care of their needs and they are in the middle stages of accumulating wealth. The strategy is an evolution of our £5k to £50k portfolio size asset allocation model.
For investors with £51k to £250k, as they manage and prune their growing portfolios, we still maintain the flexibility of relatively more cash. Reflecting this stage of wealth accumulation and the likely life and employment circumstances of these investors we have transferred some weighting from fixed income to higher-growth equity investments.
Some housekeeping and safety principles
At this stage, you’ll still mostly want to buy funds in order to spread risk within each asset class, although if you do buy shares in any individual companies think carefully about what it is doing for your portfolio and what idiosyncratic risks it exposes you to. At this stage you should have a selection of funds that achieve your desired asset allocation and you can keep topping up with regular investments.
You should have a cash pot separate to this investment portfolio for emergencies. It is commonly advised that you should have six months of your gross salary saved as cash, although this depends on commitments and what you earn.
Take your allowances
It’s important to use your allowances. Take maximum advantage of work pension schemes and as much of your annual Isa allowance (£20,000 in the 2020-21 tax year) to grow your investment pot tax-free. People aged 18-40 qualify for the Lifetime Isa scheme whereby the government tops up a portion of your savings each year.
Pick your platform
Whether you want to open an Isa, Sipp or invest in international stocks, your first port of call is an investment platform.
The range of platforms available in the UK today means you should be able to find one that suits your needs. If cost is your priority, our guides show where you can find the cheapest providers; or if service is important, we have ranked the platforms accordingly. We have also answered your key questions on Isas, Sipps and international investing, to help you get going.