7 key questions to ask about your investments

We are often asked about our Black Swan Capital approach to investment management and our financial planning approach across market cycles.

In response to this, we present here seven key questions that all expats and international professionals living in Europe should be asking when assessing their investments, pensions and other assets.

Considering these seven points, can provide perspective and help refocus on what is most important when managing your assets.

The seven questions:

1. Is there strategic alignment to your objectives?

This is a good place to start and questions why you may be holding a particular investment. On the basis that an investment is a means to an end, that is, it helps you to achieve a life goals, this initial question asks you to check whether your investment has been set up to specifically achieve your goals, or if they are aligned. If they are, and subject to the following questions, it may be a good argument for maintaining your investment. If not, it may be a trigger to make changes that better align to achieving your goals.

2. Is there tactical adjustment to the markets?

Whilst staying the course and being consistent is important, tactical adjustments to changing market cycles is important. For optimal long term investment management, you should have alignment to what you are trying to achieve but adapted for changing global dynamics. Make sure you have this.

3. Is it compliant with jurisdictions?

This is a fundamental question to make sure you are protected under the local financial regulations and that you are compliant with the requirements of your residency and your citizenship, as well as any other country where you may have a tax or reporting obligation. It is wise to be in regulated investments.

4. What is the performance relative to your goals and your risk profile?

This is a pertinent question in all markets, and especially in volatile and falling markets. The performance of an investment should be considered over an appropriate time frame, typically a medium to long term and should be in line with the risk and volatility profile of your portfolio mix. You can look at how it is performing against a benchmark of a similar risk and asset mix profile.

5. Do you have short term need for this asset as cash?

This is the first of two personal questions in relation to your investments. If you have a need for cash from an investment in the short term, typically less than one to two years, it is often wise to not be exposed to short term market volatility, and hold that asset in low risk cash or cash equivalents. Conversely, if you do not have a requirement for the money that is invested, if you satisfy the other questions, it points to you being able to continue to hold the investment through volatile patches. The benefit of doing this is the expected longer term better market return.

6. Does the performance keep you awake at night?

The second personal question. This relates to how you feel about your investment. If it is causing you stress- usually because it is not invested in line with your risk profile- you should consider what you can do to remediate this. It may be causing you stress because there is too much volatility and negative returns beyond levels you are comfortable with, or it may be causing you stress because it is too conservatively placed, and you are not generating the market returns you expect (not enough return).

In either case, speak with your adviser and align your portfolio to your goals and your risk profile to reduce this source of money stress.

7. Have you considered your portfolios as you would a property when you receive your annual valuation?

Perspective is always valuable. Property and equity investment assets often react to the markets in a similar manner and follow a similar cycle. Both can go up and down and both tend to trend up in the long term. The difference however is that equity investments show a valuation that changes every day whereas a property is usually formally valued once a year. Not receiving a daily update on an investment valuation can often be stress reducing. As an extension of this, if you receive an annual valuation on a property and it has gone down, it does not mean you have actually lost money, unless you sell the asset. It is the same with equities. If the fundamentals of that investment remain sound, it is expected it will, over time, increase in value again. When you worried about your other investments, and you have answered the questions above to your satisfaction, a reminder of this perspective can also be helpful.

If you have any questions about your investments or would like advice or a second opinion, fee free to contact us at info@blackswancapital.eu.