In the previous post, we looked at understanding cohesion, everything you need to know about it and strted to look at everything you need to do. This time, we'll go further into how to apply cohesion.
2. Take More Risk Than You Think
I’ve mentioned many times that you should get your risk profile assessed, which is the generally accepted way to start thinking about how much risk you should take with your investments. It acts as a starting point to build a portfolio which will not only achieve your goals, but do so in a manner which won't result in too much lost sleep.
However, I think we should all take a little more risk with our investments then perhaps we are initially comfortable with. The link between risk and reward is well proven, and good practice is to balance equities with other assets like bonds, property and commodities.
This achieves an asset allocation that does the trick, but if we pushed our allocations, we could reap greater rewards. For instance, take a different risk approach with your pension compared to your ISA, or partition part of your pension fund and ramp it up a bit. You only need to take small steps, and remember that you can always undo it and revert to a position that you are more comfortable with.
3. Keep Learning
The antidote to fear is knowledge. On an everyday level, the more we understand how money works, and how we work relating to money, the better off we're likely to be. Check out some other podcasts, too, to complement your learning from me. I recommend The Financial Wellbeing Podcast, Maven Money and Money To The Masses. There’s also a Money to the Masses blog, or read the Monevator or Mr Money Mustache blogs.
4. Know Thyself
Behaviour is important, and the biggest problem is that it’s difficult to be mindful. Try to be aware of your emotional responses to the different situations you are faced with as you progress on your financial journey. You could keep a journal of financial decisions including the circumstances in which you made them, how you felt at the time and the outcome.
Spend some time interpreting your own financial back story, and use the answers to understand yourself better for the next time you have to make a financial decision. Ask your partner their opinion if applicable, and remember that pride has no place in a healthy relationship towards money, or in a collaborative partnership aiming towards common goals.
5. Get Help
There are so many good advisers out there who will add significant value to you and your plans. The problem is that there are also a great many fools and charlatans and it can be difficult to discern the good from the bad.
While qualification levels don't guarantee good advice, I’d suggest working with either a Chartered or Certified Financial Planner, as both these qualifications represent a very high standard of learning and application.
Look for an advisor who wants to get to know you and not your money. See if they ask deeper questions than the ones you expect them to ask. They should be helping to tease out your hopes and aspirations, fears and concerns. They should be determining your understanding and seeking to fill any gaps so that you are informed at every stage of the journey.
Ask any prospective advisor to define what financial planning means. The answer should have very little to do with pensions and investments. Instead it should be about you, your family and your future. Check Adviserbook to make sure that your adviser is listed on the FCA register, and trust your gut at every step.