The Three Phases of Investment – Adding, Drawing, Selling
Introduction
Investing is a complex process that requires careful consideration of personal circumstances, risk tolerance, and investment goals to achieve long-term financial success. The three phases of investment – adding, drawing, and selling – are crucial components of a well-planned investment strategy.
Adding
The adding or building phase is the initial stage of investment. There are three crucial steps to follow:
- What strategy to pursue? Tax and time frame the key determinants.
- What structure to use? Can superannuation, family trusts, or simple personal ownership be most effective.
- What investments to select? Considering valuation, cost and liquidity nuances the most critical.
While thinking through those three steps, it is crucial to understand ;
- your risk tolerance,
- specific investment goals and,
- time frame.
You can then putting yourself in an ideal position to select investment options that are best suited to your circumstances and what you want to achieve.
Holding
The drawing phase is the period during which you start to withdraw funds from your portfolio. This phase typically occurs after you have retired or reached a certain age. During this phase, it is essential to maintain a balance between generating income and preserving capital. Our financial advisors will work with you to ensure that your investment portfolio is designed to meet your income needs while preserving your capital.
It is also important to note that the drawing phase is not a one-size-fits-all approach. The amount of income you require, your risk tolerance and your investment time horizon will all play a role in determining the appropriate investment strategy for this phase.
Selling
The most challenging and difficult phase is the sell down stage of investing. This phase typically occurs when you need to liquidate your investments to meet unforeseen expenses or transfer your assets to your beneficiaries. During this phase, it is essential to minimise any potential tax implications and to ensure that your investments are liquidated at the right time to achieve your goals and objectives.
Our financial advisors will work with you to determine the most tax-efficient way to liquidate your investments and to ensure that the timing of the liquidation is aligned with your investment goals.
Conclusion
In conclusion, investment planning is a complex process that involves careful consideration of your personal circumstances, risk tolerance and investment goals. The adding, drawing and selling phases of investment are all important components of a well-planned investment strategy. Our team of financial advisors is here to help you navigate through these phases and to ensure that your portfolio is aligned correctly with your long-term financial goals.
About the Author:
Will Valmadre – Associate – Vantage Wealth Management
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