Navigating the Waters of Inherited Shares

Introduction: The Unexpected Windfall

Inheriting shares can often feel like navigating uncharted financial waters. Whether it’s a few stocks in a family-held business or a diverse portfolio from a relative, understanding what you hold is the first step in making these assets work for you.

The Importance of Diversification

One of the first questions to ask when you inherit shares is whether your new assets align with your current financial goals and risk tolerance. Diversification is key. It’s not just about having different stocks but having investments that react differently under various economic conditions. This strategy helps mitigate risk and reduce volatility in your investment portfolio.

It is not uncommon for beneficiaries to inherit a single shareholding, or a handful of shares leaving the investor overexposed to that companies’ risks and returns.

Assessing What You’ve Inherited

Start by getting a comprehensive understanding of what shares you’ve inherited. Look into each company’s health, the sectors they operate in, and how these fit within your broader investment strategy. Are these shares heavily concentrated in one industry? Do they align with your ethical investment considerations? Answering these questions will help you decide whether to hold, sell, or rebalance the assets.

The next thing to consider is how each shareholding has performed against the overall market, and if it has underperformed over the long term is it going to benefit you to dispose of the shares and build a portfolio that is going to support your financial goals

Building a Portfolio from Scratch

If starting a portfolio from scratch with your inherited shares, consider the following structure:

1. Core Holdings: This should be the foundation of your portfolio, consisting of stable, reliable stocks or ETFs that track major indices. Think of adding ETFs that cover the S&P 500 or your local market index.
2. Growth Investments: Depending on your appetite for risk, allocate a portion of your portfolio to growth stocks. These are typically companies with potential for substantial earnings growth, even if they might be more volatile.
3. Income Investments: If regular income is a goal, look towards dividend-paying stocks or fixed-income securities like bonds.
4. Speculative Investments: Only a small portion should be in high-risk investments. These could be startup stocks or sectors like cryptocurrency, offering high rewards at a proportionately higher risk.

Regular Reviews and Adjustments

Regularly reviewing your portfolio is crucial, especially as your financial goals and market conditions change. This might mean rebalancing your investments annually to maintain your desired asset allocation or reassessing the sectors you’re invested in based on economic forecasts.

Conclusion: Empower Your Financial Future

Inheriting shares is more than just a financial windfall—it’s an opportunity to empower your financial future. With careful planning, informed decisions, and regular portfolio reviews, you can maximize the potential of your inherited assets. Remember, the most successful investors are not necessarily those with the best assets but those who manage their assets wisely.

Inheriting shares can turn into a pivotal financial moment with the right approach, transforming a simple bequest into a cornerstone of your wealth-building strategy.