The idea of investing for the future can seem like a daunting process. How do investments work? What does investing entail? How do you know if you’re ready to invest? There is an element of risk with any investment, so it helps to have a few things in place before you begin.
Investing for the first time can feel like a major leap. Whether you’ve inherited a large sum of money or simply worked hard to earn and save it, we understand that you want to make the right decision and make the most of your money.
We’re here to help with the overwhelm, and make the whole process feel smoother, calmer and easier for you.
The value of investments and income from them can go down. You may not get back the original amount invested.
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Are you ready to invest?
How do you feel about taking a risk with your hard-earned cash? You don’t need to be afraid of it – but you do need to be prepared for the fact that just like you could make money on your investments, there is always a chance that you could lose some, or all, of your money. It all comes down to the risk you are prepared to take.
Understanding the risks
If you have a longer time frame and plenty of spare cash to fall back on, investing may feel like somewhat less of a risk. However, if you feel that there would be sleepless nights if the market were not to perform as it should, it’s worth going for something less risky. We are on hand to talk you through what this would look like, and the various risks involved with each decision.
Do you have debt?
It’s sensible to pay off any debt before you start investing, or at least reduce your debt to a manageable amount. This is because the interest you are paying on your debt could be more than the payments you could receive from your investments.
We recommend that you conduct an in-depth assessment all of your income and outgoings and ask yourself how much you can realistically afford to invest. If you have spare money aside, great! But if you know you will need that money within the next five years, investing may not be the best option for you right now.
As always, when we work together, we will help you assess your circumstances and we will be honest with our advice and recommendations based on your specific needs.
What do you want to achieve?
When it comes to investing, you should have a clear goal.
Are you looking for some regular income, or are you wanting a lump sum further down the road? Having a clear goal will help inform your decision about how much you need to invest, over what time frame and how much of a risk you will need to take.
If you have a short-term goal (less than five years), it could be more appropriate to stick with savings, as if your investments fall in value, they may not return to the appropriate amount in such a short period. However, if you have a medium to long-term goal (five to 10 years+), investing could be the more appropriate decision, as if it falls in value, you should have the means to earn to build it up again.
Regular income vs lump sum
A lump sum is when you invest all of your money at once. If you are comfortable with risk and know what you wish to invest in, a lump sum is a great idea.
An example of a lump sum investment is investing £10,000 on the stock market – be it bonds, shares, or units in a trust. They are bought at the same price, and you benefit from any price rises immediately.
However, if what you have invested in goes down, your money will follow suit. Long-term investing would give the market time to recover, but the same can’t be said for short-term. This is why it is important to keep a close, regular eye on the markets.
If you wish to see a regular return, regular savings, also known as ‘pound cost averaging’ is more appropriate.
An example of pound cost averaging is investing a specific amount each month into your chosen shares over a set period. If the share prices decrease one month, you can buy more shares for your money, meaning that by the end of the chosen time period, you could end up with more shares than you might have if you had invested a lump sum. If this does happen, the only money that will be affected is the money you have in at that time, not the entire lump sum.
However, if the share price continues to rise over time, you will benefit increasingly less as you won’t have all of your money invested at any one time.
We strongly recommend that you ensure your income is protected before you invest. If worst came to worst and you were unable to work for an extended period of time, you need to make sure that you and your family will still be able to pay the bills. As a general rule, it makes sense to have at least three months of savings to fall back on as an emergency fund.
We also recommend thinking about a pension before you invest. If you are employed, pensions can benefit from employer contributions and tax breaks, and so are a less risky investment for retirement. If you already have a pension, you can think about investing any spare cash you have to boost your pension once you retire.
Are you ready to invest?
There are so many investment options that it is always worth talking to a professional who knows the market and can advise you on which option(s) will be best suited to your circumstances.
Whether you are still unsure or you are ready to invest, our award-winning all-female team of advisers can help you develop a clear idea of how to invest, what to invest, and the best way of doing so for your circumstances, so that you feel completely confident in your investment decisions. Book a discovery call and discuss things further with a member of our team.
Disclaimer: This notice cannot disclose all the risks associated with the products we make available to you. You should not invest in or deal in any financial product unless you understand its nature and the extent of your exposure to risk. You should also be satisfied that it is suitable for you in the light of your circumstances and financial position. Different investment products have varied levels of exposure to risks and to different combinations of risks.
Our disclaimers are not intended to be fully inclusive of all relevant risks; we would strongly encourage to you ensure that you have read all relevant literature, and that you are comfortable that you understand all of the associated risks relating to an investment, before you decide whether or not to purchase it. Should you be in any doubt as to the risks involved, or to the suitability of a particular investment, you should seek professional financial advice.
Please note that investment values can go down as well as up and past performance is no indication of future performance.