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A Question of Risk

“How much should you invest?” Investing after all comes with an inherent risk due the accepted volatility of markets, so a sensible cash reserve should always be retained.

Whilst most investment portfolios will give you an indication of how much volatility to expect, how can you manage your own expectation and investment journey? Hopefully the following steps and simple diagram below will help:

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Too much cash in your business? What options do you have?

Are you comfortable with your business’s current cash deposits? Did you know that a company or LLP has a number of options to choose from? A top priority has to be tax-efficiency, ideally combined with the additional benefits of security, easy access and flexibility. Selecting one that offers everything can be difficult.

The instant access and relatively safe (but modest) returns offered by deposit accounts may be a reasonable default position, but has it become less attractive with falling interest rates and inflation? If you are a business owner you could:

  1. Do nothing
  2. Use high-interest accounts/bonds
  3. Take a loan from the company
  4. Distribute the funds as dividends
  5. Make company pension contributions

But have you considered looking at other investment solutions for your liquid assets?

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