Let’s take a closer look at what choosing a Smart multi asset Basket involves.
Choosing a Smart Multi asset Basket With NovaTerra, whether you simply choose from our full list of Smart multi asset Baskets or use our FA recommendations – for most investors it’s vital they consider the following: time, risk, and preference.
What’s your time horizon? This refers to how long you’re willing to stay invested in an asset before selling. As a general rule, if you were saving up for an engagement ring, for example – chances are your investing time horizon would be shorter and your willingness to take on elevated risk will be lower.
Investing for retirement, by comparison, is a completely different ballgame. With a longer time frame investors can generally afford to take on more risk and / or prioritise growth investments over income investments.
While higher risk assets like stocks can be volatile in the short term, over the long term they have historically performed strongly, making them ideal for an investor with a long term goal, like retirement.
In this case, NovaTerras Reits, Oil and Gas, Renewable energy, DeFi and DAGs held in the multi asset basket – which both have the objective of maximising risk-adjusted returns and capital appreciation (but are focused on different geographies) – might be worth investigating further.
What’s your risk tolerance? This refers to how much risk or volatility you’re willing to accept as an investor. With NovaTerras multi asset Baskets you can select between low, moderate, and high risk.
Risk tolerance and time horizon go hand in hand. The longer your investment time horizon, the more risk you are generally able to take on when making an investment.
Here’s what we mean by that.
Financial markets – especially stock markets – can be incredibly volatile in the short term. In 2022 the S&P 500 – arguably the world’s most important and popular index – fell a staggering 18.01%.
For those with short term goals, these kinds of wild swings in value can be particularly disastrous. If you’re saving for an engagement ring, but your savings get slashed by 18%, your partner likely doesn’t care why or how the S&P 500 has crashed!
In this case, investors might be interested in investing in lower risk assets. When it comes to multi asset Basket investing, the NovaTerras conservative growth which target – you guessed it – conservative growth and income generation, might be worth exploring.
On the other hand, for those who are willing to take on higher levels of risk and stay invested for a longer period of time, higher risk assets like stocks have long proven an attractive option.
Case in point: over the last 10 years the S&P 500 index has annualised returns of 10.12% to 29 March 2023. And yes, that includes the 18% drawdown we mentioned above.
Which type of investments do you prefer? When it comes to multi asset Baskets, you can select between growth – which refers to investments that are expected to rise in value over time, or dividends – which refers to investments that provide investors with a consistent stream of income.
As we said at the start, your investment preference will be tied to your investment goals. Generally speaking, growth investing is more suitable for people with longer time horizons and higher risk tolerances, and income investing is better suited for people with shorter time horizons and lower risk profiles.
We believe our single 2.75% management fee is more cost-effective than traditional venture capital funds under the ”2 and 20” model (2% management fee, 20% carried interest).
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