When investing in alternative assets there are a number of factors that might determine how successful you are likely to be. Avoiding these 7 typical mistakes will help to improveyour chances of long-term investment success.
Forgetting to claim tax relief – it can happen!
This should be handled by fund managers, but at some lower-tier practises, mistakes have happened where investors have failed to secure Capital Gains Tax relief, or investors have not realised they may be eligible, and HMRC has subsequently refused to accept the late claim
Not reinvesting profits back into EIS or SEIS
Capital gains can be reinvested back into EIS for 100% CGT deferral. You can also claim income tax relief again!
Not capitalising on business property relief (BPR)
Investors liable to Inheritance Tax in the future should look to invest in businesses eligible for BPR to gain relief from IHT charges of 40%
Failing to declare a capital loss on your tax return
Capital losses can be applied against future capital gains, allowing investors to recoup a portion of their losses
Investing without an exit strategy
Most alternatives are long term holdings and illiquid. If you don’t invest in an asset being managed to exit your capital could be locked up and you won’t be able to access it.
Not balancing alternatives with the rest of your portfolio
Alternatives should be small part of a balanced portfolio. Alternatives should be a small part of a balanced portfolio. It’s never a good idea to have all your eggs in one basket!
Investing without doing the right DD
Lots of great ideas won’t become successful investments and unless you have the time to go through a company’s financials and strategy, it’s easy to get swept up and make a decision based on emotion not reason.
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