The Assets that Support Your Goals

The world of investments can appear overwhelming, and there is a barrage of advertisements online, on tv, and on billboards that purport to provide the solution to your needs. It’s easy to delay making a start for another day, another week or another month, but each delay is just putting off the inevitable – and costing you money in the long term.

While media coverage like to sensationalize stock market ups and downs – especially the downs, over the last century, shareholdings and investments in the stock markets have provided by far the highest returns. Government and corporate bonds, increased their value by a much smaller amount, with less volatility in prices along the way. So while stockmarket investments can rise and fall more, bonds and cash deposits have a higher chance of not keeping up with inflation – meaning over time your money would have less spending power, and you may not reach your financial targets.

People also have full and demanding lives, leaving them little time to devote to gaining a better understanding of the financial markets. These are all genuine reasons, but doing nothing can hurt your pocket even more.

Interest rates on bank deposits are minimal, so leaving your money in a bank account would lead to almost the same result as putting it under your bed. Small increases in the rate of inflation could seriously erode your spending power, and if inflation increases significantly, you may find yourself short of what you need to maintain your lifestyle.

Investing in something more familiar, such as your company or real estate can generate high returns. However, not diversifying comes with heightened risk. Over the last twenty years or so, there have been several booms and busts in sectors such as financial services, dot-coms, energy, biotech, and real estate. There have been many equities that appeared to be guaranteed winners which subsequently crashed, or were overtaken and forgotten as new leaders came through.

Holding a large proportion of your wealth in a single company’s stock can substantially increase the risk to your portfolio risk, and may also result in significant tax implications when the time comes to sell them.

If you want to safeguard your financial security, and that of your children and family, failing to invest leaves you at a severe disadvantage. Knowing some of the fundamentals of investing is useful, even if you plan to hand the management of your investments to professionals such as VyoGroup Wealth Management.

Investing Basics

After getting to know you as a new client, understanding your objectives and needs, our asset allocation approach begins by categorizing investments into the roles they are to play.

Most portfolios should be well-diversified and incorporate three types of investments: return seeking, risk- moderating, and ones for diversification. The balance of the three that is right for each individual is dependent on their time horizon, aims and objectives, and acceptance of risk.

Some of the main types of investments are:

Risk-moderating investments

These are intended to add stability and generate income, acting as a counterweight to the more volatile return-based assets. The two primary types of risk-moderating investments are bonds and cash. The long-term returns of both bonds and cash are much less than the profits generated by shares, but there is less price volatility.


These are tradable debt instruments primarily issued by corporations and governments. Investment-grade bonds are rated from BBB up to AAA by credit-rating agencies such as Moody's, Standard & Poor's (S&P) or Fitch. Their ratings indicate that the issuing government or corporation has a high probability of paying interest and repaying the principal amount on time. Bond prices typically are moved by changes in interest rates and perceptions of the credit quality of the entity behind them. Some bond prices are also affected by inflation or market volatility.

Cash Instruments

Cash instruments are debt with typically under one year until they mature and whose value is ascertained directly by markets. Cash instruments can be categorized as securities and other cash instruments, such as loans and deposits, and are generally less volatile than bonds. The capital value of cash instruments will not fluctuate with interest rate changes. Due to their minimal returns, the main risk from cash instruments is that their buying power will be eaten into by inflation.

Return-based assets

These are investments aimed at producing growth and tend to be more volatile and risky than bonds or cash instruments. This category of investments includes equities and high-yield bonds, and as they are more volatile, further diversification should be included in return-based portfolios.


Equities, which are also referred to as stocks, represent ownership of a part, however small, of a publicly traded company and offer a substantial opportunity for an increase in value, or a loss.

Many equities can be bought and sold easily due to the size and volume offered by the financial markets. They can also generate income by way of dividends and can be susceptible to inflation over short periods but generally withstand the effects of inflation as higher prices eventually filter through to the stock issuing company’s revenue and earnings.

Over longer terms, equities have gained far more value than other asset categories, but have been subject to significant volatility, particularly around the time of the financial crisis, but have more than recovered.

Time Makes All The Difference

Equities tend to show their real value over extended periods and can go through significant ups and downs in the shorter term. Returns from bonds are more reliable but lower, so as no-one can accurately predict the future, the right mix of asset classes for any portfolio depends on the client’s time horizon, objectives and risk acceptance.