Yorkshire Post - February 2007
Contributor : Jonathan Fry

I read an interesting letter at the weekend from a lady in her sixties, asking what would be the best investment for her?

She had some capital in a building society account, her daughter advised her to buy a property to let out, a friend had suggested putting some of the money into an investment linked to the Chinese stockmarket. The friend thought China to be a good bet at the moment as its economy is growing so quickly.

What she wanted to know was the best thing to do with her money, and hoped we could provide her with a straightforward answer.

As a financial adviser, how would I begin to answer that question? We could begin by talking about property rental yields, or looking at the performance of funds investing in China and the "tiger" markets, but would this bring us any closer to knowing which was the "best investment"?

Perhaps not unsurprisingly, I would begin, not with the answer, but by asking a few questions of my own? In my work, questions are like keys which open the doors to reveal how clients are thinking?

I ask them about what is important in their lives at the moment, what their objectives are, do they need extra income or are they seeking capital growth?

I ask about their experience as an investor. Some of our clients like to spend time considering investment reports, studying the markets, researching the most competitive bank and building society accounts to maximise the return on the their money. For others, this is time they could be spending doing things they enjoy, like playing golf, sailing or travelling.

We use the answers which our clients give us to build an identikit picture, what we call an investment profile. Perhaps one of the most important element of this profile is understanding a person's attitude to investment risk; if you bought shares which fell in value, would you lie awake at night worrying about it, or could you afford to leave them to recover?

There is an old Japanese proverb which says "knowledge without wisdom, is like a pack of books tied to the back of a donkey", and when it comes to investment, a little knowledge can certainly be a dangerous thing!

So, in trying to answer our lady's question, I would advise her to pause, and metaphorically speaking, look at her profile in the mirror â?? and begin by accepting that the answer depends not so much on finding the "right investment", but on finding what is right for her.

What is she wanting to achieve? Does she need access to the money quickly? How much experience does she have as an investor? We have clients who would no sooner invest money in China than try to fly to moon! Equally, we have others who are willing to commit money to more volatile investments, in the hope of a more substantial return.

Taking a pen and paper and a few minutes of time to sketch out our profile may well help us to find the right investment for our particular needs, even if it does not pay the highest dividends.

© Yorkshire Post 2007