A compensation payout may seem like a large amount of money. But it must last for the lifetime of the injured person and provide cash flow to meet potentially complex living needs and costly medical, care and equipment expenses.
When investing compensation funds for an injured person, there is a delicate balance required between generating steady cash flow to meet expenses and having exposure to assets that will provide longer term growth to ensure the funds can last for life.
A long-term investment timeframe is necessary when investing in growth assets such as shares and property. However, growth assets can be volatile in the short term and the worst time to make a withdrawal from growth assets is during a market downturn.
At Aeran we use strategies to ensure there are sufficient funds held in cash and conservative investments to meet a client’s cash flow needs in the short term, while also having exposure to growth assets to keep pace with inflation over the longer term.
During periods of extreme market volatility, as seen in recent years at the start of the Covid-19 pandemic, such strategies help protect the value of a portfolio. By holding sufficient funds in cash and conservative funds to meet short term needs there is no need to draw from growth assets during a market downturn, giving the growth assets time to recover.
Determining how much risk to take on (through exposure to growth assets) is important. Using careful financial modelling we can ascertain how much exposure to growth assets is necessary to ensure funds will meet anticipated expenses for a person’s life expectancy. This enables us to establish an appropriate investment strategy to meet cash flow needs without taking on too much risk.
As things change over time, regular reviews are vital to ensure the plan remains on track to meet the injured person’s needs. We provide and explain our annual review documents to clients. Information and understanding delivers peace of mind.
Ongoing financial advice from an adviser specialising in personal injury not only helps funds last a lifetime but makes the journey less stressful.