Part 3 of MR MONEY MAKER’s guide to building a long-term savings portfolio

The basics 

None of us has the gift of foresight, although some egos would claim such powers. So Rule 1 of investing money, as hammered into me by the influential City figure Richard Durlacher, is simple: ‘Justin, just don’t lose the sodding stuff.’ 

That may appear trite but all too easy to ignore for those who follow the siren call of the star investment managers who flash through the sky, only to explode like a meteorite – taking your money with them. 

The good news is that we have a very wide range of investments to choose from. Unfortunately that is also the bad news. Investments can be divided into separate asset classes, and you will often hear the term of ‘asset allocation’. 

Slice of the action: The main class will be shares but then also bonds (government and corporate), property, commodities, gold and cash

This sounds complicated, but it is not – it is just making sure you don’t put all your eggs in one basket.

What to include? 

We have a broad choice of different types of investments, from individual shares and bonds through to funds. 

For the moment, though, let me focus on the core issue, which is to achieve the right balance of risk and return for you by a blending of different asset classes. 

The main class will be shares but then also bonds (government and corporate), property, commodities, gold and cash. To that we can also add some alternative investments like wine, coins, antiques and most recently the fashion fad that are the cryptocurrencies such as bitcoin.

What can I learn from this? 

All these asset types will vary in value, volatility and return. So to answer the key question of what investment, the answer is – most of them. Investment is a long-term game and this is the difference between having a punt and growing your portfolio steadily and securely over time. 

So what can I do? 

First we go back to our balance sheet. What assets do you and your family already own? Quite likely this will include property but also a pension which will have a blend of asset classes in it. 

Then most of us will have a muddle of other stuff, including deposit accounts, premium bonds and maybe the odd gold coin left by your favourite auntie. Time then for some proper housekeeping and take an inventory of your assets. 

And then? 

You will have already laid out a plan for how much you are going to need in the future. Thus you will know the target number you need to achieve by a certain date. Next week we can start selecting what blend of asset classes you are going to need to achieve that goal. 

PS: If you are wondering what is Rule 2 of investment, it’s simple: refer to Rule 1. 

Justin Urquhart Stewart co-founded fund manager 7IM and is chairman of investment platform Regionally. 

This post first appeared on Dailymail.co.uk