The investing process begins by understanding what you are trying to achieve financially. This ensures you invest in a way that best suits your circumstances. If you don’t have an investment plan already, it might be a good time to consider developing one. This will help you create a ‘road-map’ to help you achieve your goals.

As a general rule, every investment plan should address the following issues:

  • Accurately identify the long-term objectives for you and each of the members of your family
  • Ensure your business has adequate cash reserves and a reliable line of credit
  • Project likely business income over the coming years and beyond, and provide a rigorous assessment of its reliability
  • Fully recognise any accumulated tax losses
  • Determine viable business investment projects
  • Establish the amount of capital available to you for investment
  • Ensure the plan is flexible enough to meet changing circumstances

 Investing outside of your business

Business investment must naturally be considered first.  It always makes good sense for people or businesses to invest in what they know best and there are often family and lifestyle reasons for investing in your business.  But investing some money outside of your business is often a prudent long-term solution:

  • Establish retirement income away from your business
  • Cater for members of your family who will not be involved in the business
  • Applying the basic ‘spread of risk’ rule, it is prudent to have some of your capital invested in other than just your business
  • Changes in overseas markets, the New Zealand economy, exchange rates or government legislation could adversely affect your businesses and undermine its value

 Consider your family’s future

Possibly the most important step of all is to consider the future for you and your family. Determining how you want to live in retirement could have a major bearing on how you decide to spend, save or invest new money, as well as any future income.

One of the most important goals of investing is to maintain the real spending power of your savings.  The best way to both protect capital and provide potential for further growth is through maintaining a balanced portfolio of investments.  A balanced portfolio is diversified across the different asset classes (including fixed income, shares and property), as well as being invested across different sectors and geographies.

You’ll also want to consider succession planning (i.e. looking at whether the business will stay in the family and how each family member will be included in the business after you retire).

Discussing your goals and potential obstacles with your accountant and investment adviser is a great place to start when considering investment planning.  With the help of an investment adviser, an investment portfolio can be created to help you achieve your financial goals.

Article kindly supplied by Craigs Investment Partners