Thomas and Karen are a married couple who have both been working internationally for 15 years. The 40-somethings, who are currently living and working in the Netherlands, would like to invest some of their savings but are not quite sure what to do.

They have a sum of EUR 100,000 in their savings account and do not need this money in the short-term. Interest rates are very low and it doesn't look likely that they will rise in the near future. They would like this capital to work harder for them and, as they both harbour hopes of retiring to France, they want to invest for the longer-term.

Thinking ahead
First, we would advise them to be clear about how much they can set aside for investment. They decide to keep EUR 20,000 on deposit and this can serve as their "emergency fund". EUR 80,000 can therefore be invested.

Second, they need to be clear about their risk profile. Understanding the relationship between risk and reward is fundamental to making sound investment decisions.

In order for capital to produce a return that is potentially higher than cash over the medium to long-term, investors need to accept that the value of their capital may fluctuate and can be volatile. The eventual "portfolio" should therefore match the investor's risk profile, usually measured from "cautious" at the lower end of the scale, "balanced" and then "adventurous" at the higher end.

If you are at all unclear about this, then you should seek help from a licensed adviser.

Third, they should consider how best to access the wide range of investments available to them. There is a vast array of asset types they can use; collective investment funds (mutual funds/unit trusts/OEICs/ETFs), direct stocks and shares, fixed-interest bonds (corporate or government bonds), property funds, commodities.

These can be accessed either directly or through a stockbroker. The problem is that this can be difficult to arrange, especially when you are living abroad and, unless you are an experienced investor (and very good at administration!), it can all prove a bit of a headache.

Portfolio bond
In many cases, using a "portfolio bond" can be a great solution. This is simply an administrative "wrapper", and something which many investors use to hold a variety of assets in one account. From these "wrappers", an investor can normally access any authorised and listed asset, for example any listed mutual fund / unit trust, ETF, tracker, company shares, property funds, etc. They are usually administered by international insurance companies and offer online access to view your "account" at any time.

Other advantages of portfolio wrappers include the low cost of administration (normally you can access assets at no initial charge) and tax-efficiency. Tax implications are of course dependent upon where you are a tax resident and we would stress that professional advice should always be sought in relation to taxation issues.

Considering that Thomas and Karen are planning to move to France, we advise that they use a Portfolio Bond with "assurance vie" status (many investments are not). This means they can benefit enormously from beneficial tax treatment (little or no tax on the growth) when they actually come to use the money in France.

Regulation is also important - in most cases an EU-based provider is most suitable. For these reasons, choosing the correct administrative "wrapper" is very important.

What assets to invest in
So, once they have carefully selected the most efficient platform for their capital, what assets do they actually invest in? Diversification is the golden rule here. Make sure that you do not end up with all eggs in one basket! This all depends on your risk profile, however we would tend to recommend exposure to each of the main asset classes.

Capital Protected Plan
Having decided to use a Portfolio Bond, Thomas and Karen decide to split the money between a 100% capital protected plan and some actively managed funds.

Using special terms negotiated by The Spectrum IFA Group, one plan offers a guaranteed return of +7.12% after one year on HALF of the invested capital. The other half is returned after 5 years with a return linked to the relevant market index, and a minimum return of +8.15%.

Liquidity is also an important issue, so we recommend that the remainder of the investment (about 70%) is in daily tradable, liquid funds (i.e. not tied-up), and is invested in a mixture of the following types of funds:

Multi-asset funds
Multi-asset funds are popular with investors as they are managed by experienced asset managers who, through active daily management, can offer access to all asset classes within a single fund. Their job is to capture capital growth while also protecting investors when markets suffer a severe downturn. Some fund managers have a great track record of doing this, for example Carmignac, HSBC and Jupiter.

Equities (shares)
Many blue-chip companies pay dividends of between 4-5%, which is higher than current interest rates and can be re-invested for capital growth. Shares should be globally diversified, with exposure to the emerging markets (Asia, Latin America and beyond) as well as developed markets (US, Eurozone).

Fixed-interest bonds
This includes government bonds and corporate bonds. Again, emerging market debt funds (with exposure to local currencies) should also be considered.

Commodities
This can be assets such as gold and other precious metals, but you can also have access to other ‘soft' commodities such as wheat and livestock.

Property