Investing for the younger generation - taking the long view

Investing will always be about the balance of risk and reward. Selecting the right asset allocation strategy and taking a long-term view can help achieve that balance.

With some US$16trn of wealth due to be transferred between generations over the next few decades, the question of how best to invest that wealth is one of the key challenges facing the next generation of wealthy families.

For those young people, it is important to start gaining an understanding of investment strategies and being aware of the investment options that may be available to them now or in the future.

Jose Rasco, Head of Investment Strategy, HSBC Private Bank, Americas, outlines the key considerations that need to be taken into account when investing capital:
“First and foremost is preservation of capital,” he says. “Secondly, we are aiming to outperform the local inflation of the market where you are living and consuming so that your purchasing power is not eroded over the longer term. Finally, we, of course, want to grow the capital above and beyond the initial investment.”
In achieving those three key aims of a robust investment strategy, the key is building a diversified portfolio that uses different asset classes – cash, bonds, stocks and alternative asset classes such as hedge funds, private equity, real estate and commodities – in order to achieve the best return at the lowest risk.

“Ultimately, no asset class performs well at all times so it is important to have that diversification across your portfolio,” explains Calvin Hsu, an Investment Counsellor at HSBC Private Bank.

“Diversifying helps you to reduce the impact of those key factors – volatility and inflation, amongst others – that can affect your portfolio.”
The other key element in striving to maximise returns is the ability to take a long-term view on investment strategy. And that is where the younger generation find themselves in a good position with the ability to invest for the long term. As Jose Rasco explains:

“In you invest for the long term and you stay in the markets for the long term, history shows that you are likely to be much better off.”

“What’s more, today’s younger generation has a great investment opportunity because the global marketplace for equities and bonds is about to change and dramatically increase. It’s going to become more complex and multifaceted. So this is certainly an exciting time for the Next Generation.”
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Risk warning

It is important to note that the capital value of, and income from, any investment may go down as well as up and you may not get back the full amount invested.