07/07/2011

By Lanying Burley, Investment Director at Smith & Williamson Investment Management Ltd

As an owner-manager or entrepreneur your focus is on growing your business, but there’s life outside as well!

In this article (part 1), we consider investment options in the current inflationary times. Part two focuses on investing tax efficiently in today’s high-tax environment.

Effective wealth management requires a well-managed and diversified portfolio of investments. As business owners, with earnings that fluctuate from year to year, you’ll probably want a flexible approach.

While equities will probably form part of any investment portfolio, there are other options worth considering. Here are a few to think about:

1. Government Index-Linked Bonds may be of interest to higher-rate taxpayers. While tax is payable on the income at your marginal rate there is no capital gains tax on any growth, if this can be achieved.

2. Gold and commodities may be worth looking at in these inflationary times. Gold has historically been held to protect against the devaluation of paper currencies. Commodities can be more volatile, but a well-managed and diversified fund can help reduce the risks.

3. Property remains popular, despite the recent drop in house prices. An improving economy, low interest rates and tax-free capital gains on your main home means property could still be one of your favoured investments.

4. Loans and mortgages on variable rates might be worth reviewing while still in this low-interest environment. Consider switching to a fixed-rate product or overpaying to reduce your outstanding loan. But be sure to check for early redemption penalties before taking any action.

Risk warning

Investment does involve risk. The value of investments and the income from them can go down as well as up. The investor may not receive back in total the original amount invested. Past performance is not a guide to future performance. Rates of tax are those prevailing at the time and are subject to change without notice. Clients should always seek appropriate advice from their financial adviser before committing funds for investment. When investments are made in overseas securities, movements in exchange rates may have an effect on the value of investment. The effect may be favourable or unfavourable.

Disclaimer – By necessity, this article can only provide a short overview and it is essential to seek professional advice before applying its contents. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

Smith & Williamson Investment Management Limited Authorised and regulated by the Financial Services Authority.

Lanying Burley is an Investment Director at Smith & Williamson Investment Management Ltd. For more information or investment ideas, call her on 020 7131 4000 or email lanying.burley@smith.williamson.co.uk.

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Watch the video below featuring Nick Wallis and Sarah Winter of Smith & Williamson discussing the importance of having a share scheme.

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