Which investments suit different investors?

This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Smith & Pinching in Norwich, Lowestoft and Eaton. The Financial Conduct Authority does not regulate taxation advice, estate planning or inheritance tax planning. The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.

Not all investors are the same. Some have a “low” tolerance to investment volatility and risk, whilst others are comfortable watching their portfolio fluctuate in value. One investor may have the primary goal of growing their long-term wealth. Another may wish to retain as much wealth as possible whilst drawing an income from it.

How can investors construct a suitable portfolio for their needs? Here at Smith & Pinching, our financial advisers are at hand to help investors understand their different investment options and include the right ones for their goals and strategy. Below, we explain some of the key asset types to know about in 2023-24 and how they can fit into different portfolios.

We hope these insights are helpful. If you want to discuss your strategy with us, please get in touch to arrange a no-obligation financial consultation:

01603 789966
[email protected]


Cash investments

The most familiar of asset types, cash is ideal for investors with a short-term financial goal (e.g. building a deposit for a mortgage within 3-5 years). It can also be a useful “storage area” for your emergency fund, since easy-access funds can be withdrawn readily when needed. However, cash is rarely a good vehicle for long-term wealth growth.

This is because interest rates from cash rarely beat inflation. Over time, prices tend to rise and this erodes the spending power of your savings. In the long run, other asset types, such as bonds and equities, can offer higher investment returns.


Fixed-income securities

For individual (“retail”) investors, the most common type of fixed-income securities are bonds. These can be thought of as “loans” between an investor and a government or company. The latter issues a bond to investors, borrowing money from them and promising to repay them by the agreed maturity date – with interest.

These investments can be attractive to more risk-averse investors since they have a high degree of certainty about bond repayments (the “coupons”) and are promised their money back at a future date. There are also different bonds for different investor needs.

For instance, one bond might offer a low future capital gain but a high coupon. This could be ideal for an investor who wants their bonds primarily to generate an income. However, an investor mainly concerned with capital appreciation may prefer a bond with a high capital gain but and a low-interest payment.

Bonds have their downsides, however. If you sell certain bonds before their maturity date, then you may not get your preferred price for them if interest rates have gone up (which makes newly-issued bonds more attractive than pre-existing ones, with their lower interest rates). There is also the possibility that the bond issuer may default and not repay the debt owed to investors. Here, investors can evaluate the risk by looking at the bond issuer’s “credit rating”.

The UK government, for instance, is currently rated at around a “AA” for bonds (“very good”) but a country like Ethiopia has a “CCC” rating (considered “speculative” or “junk” grade). The higher the credit rating, the lower the risk for investors. Conversely, a lower credit rating tends to present higher potential returns – yet at a higher possibility of default.



By gaining a degree of ownership (equity) in companies, investors have the chance to grow their net worth. This is primarily done by investing in shares – either by directly purchasing individual stocks or by investing in an equity fund (which pools money together from many investors to invest in many companies). Returns can then be generated in two main ways: investors can sell their share for a higher price than originally bought (a “capital gain”) or they can receive a regular share of company profits (“dividends”).

Equities are widely seen as one of the best asset types for growing long-term wealth. Over the last three decades, for instance, the FTSE 250 (representing some of the UK’s biggest companies) grew by 4.5%, on average, ahead of inflation. However, the main downside of equities is that they can be quite volatile. Market crashes, such as the 2008-9 Financial Crisis, can lead equity portfolios to fall dramatically within a short space of time. If investors are not disciplined in maintaining a long-term view with their investments, investors may flee the market to avoid further losses – crystallising their “paper losses” in the process.


How do I choose the right investments?

As stated a the beginning, every investor is different. There are also thousands of investments to choose from. Moreover, investors can feel overwhelmed by the jargon and volume of information they need to consider when building a portfolio. Therefore, it helps to work with a financial adviser to narrow down your options within rigorous criteria. A professional can help you examine the underlying “fundamentals” of different funds, for instance, to discern their risk level, fee structure and performance potential. Your adviser can also help you ask yourself the right questions about your investment goals and your attitude to volatility. Additionally, once an investment plan is implemented, a financial adviser can monitor its progress and keep you informed about any necessary changes to keep everything on track.



If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:

01603 789966
[email protected]