It can be intimidating to consider investing for the first time. It’s challenging to ensure that you understand everything, as well as the risks that are associated due to the abundance of sophisticated language.

There are various investing possibilities available.

Which one is most suitable for you (if any)?

That will depend on your unique situation and financial outlook. Before investing, it's always a good idea to speak with a financial advisor to be sure you're choosing the most suitable option to fit your circumstances.

The need-to-knows

1. Investing is about taking risks with your money

The difference between investing and keeping your money in a savings account where it earns interest is considerable. You're betting on the outcome with your money instead of having the security of guaranteed returns. The ideal outcome is to gain much more money than you invested, but it's also possible to lose money.

While the idea of stock markets may conjure up images of young brokers screaming "Buy! Sell!" with heads in their hands one minute and fist-pumping the next, the reality of long-term investing tends to be rather more mundane.

Professionals carefully pick a few shares or funds, keep an eye on them and then cash them in when the time’s right.

2. There are no guarantees

How much growth can you anticipate from your investments?

Most investors typically want an answer to this query because they decide to invest in the stock market based on the likelihood of future growth. Let's be clear: we can't predict what you will receive, and anyone who claims to be able to do so, is lying. However, we can offer you a general idea of what is possible.

Despite recent increases in savings account interest rates, inflation is still significantly higher than those rates. It makes sense that many of us are turning elsewhere for returns.

 3. Only you can decide if investing is right for you

No matter if you're ready to purchase your first share or choose a stock market fund for the first time, always consider WHY you want to invest before you do.

Stocks and shares have consistently out-performed savings accounts over the long term. However, there is no assurance that they will continue to do so. It all depends on your unique situation.

That’s why you need to find an adviser who you believe understands you and your situation and explains things in terms you understand. That way, you give yourself the best chance of making the right investment decisions for you.

4. Never invest more than you can afford to lose

Too many people mistakenly believe that you need a lot of money to invest in the stock market; however, you don't, and many smaller investors who 'drip-feed' in little amounts on a regular basis can perform considerably better than those who simply dump a large lump sum into the market.

Always invest no more than you can afford to lose, as a general guideline. This is due to the possibility of losing a significant portion of your wealth in the case of a stock market crash.

Many financial advisers advise investing for a minimum of five years.

The 5 golden rules of investing

• You typically have to incur more risk if you want a higher return.
  
  
• Diversify your investment portfolio to limit your exposure to any single type of asset (eg stocks, bonds, cash etc), therefore helping to reduce the risk of volatility of your portfolio. The primary goal is to blend your investment portfolio across many different asset classes and market sectors to not have too much exposure to one individual asset class, and therefore mitigate the risk of each.

•  It's a good idea to avoid taking too many risks if you’re short-term saving. It’s advised that you hold investments for at least five years. Many suggest you should avoid investing and keep your money in a savings account if you need access to funds in less than five years.

•  Carefully consider your investment portfolio. You might not be as willing to take chances as you once were, or a share could turn out to be a dud. If you don't periodically check your portfolio, you can find yourself with a losing share account.

•  Don’t worry. Investments may increase or decrease in value over time. Avoid the temptation to buy or sell shares just because everyone else is doing it.

Remember, if it sounds too good to be true, it probably is. No one should be promising you returns, and if you’re being pressured into investing, this could be a scam.

For any more questions, guidance and advice on what kind of investments could work for you, get in touch or call 0121 285 8528 to chat with one of our advisors.

 

Disclaimer: The value of your investments can go down as well as up, so you could get back less than you invested.

 

The purpose of this communication is to provide technical and generic information and should not be interpreted as a personal recommendation or advice.