Guide To Investments

Guide To Investments

Through investment, you have a much greater potential for growth than by leaving your money in a savings account. In the current economic climate, with interest rates so low and inflation rising, you could be losing out by keeping your money in a savings account because inflation is beating the return on interest rates and, therefore, the real spending power of your money is less.

Investment can enable you to match or even beat inflation and help you reach your long term financial goals. When you invest, you encounter what is known as a risk/return pay off. Traditionally, the greater the risk you take with your money, the greater the potential for growth. But with this comes an increased chance of losing your money. Before even considering investing your money, you need to be fully comfortable with introducing the potential for loss.

When making financial decisions, it’s important to consider the following:

What are your financial goals?

Set a clear goal of what you want to achieve by investing. Are you just looking to grow your money? Are you looking to provide an income? Is there a set amount that you want your money to grow by or a minimum income that you need to be provided by your investments? Having an idea of these will help you to decide how much risk you need to take to reach your goals. You may not have a particular reason to invest or it might be open ended, but try to ascertain exactly what you want your money to do.

What’s your investment time frame?

Once you know what your goals are, work out how long you need to achieve them. This will give you a clear idea of the kind of rates of return that you’ll need from your investments and whether or not your goals are realistic.

If you have short-term goals you should consider capital protected investments, Medium and long-term goals are appropriate for higher risk strategy investment but remember that as you near retirement you will have less time to recover if markets fall.

Understand your attitude to risk

If you want your money to grow significantly over a shorter time period, you may have to invest in riskier assets to achieve that growth – but if the potential downsides are too much, you may have to realign your goals.

How much can you afford to invest?

Review all of your outgoings, like insurance premiums, pension contributions, savings and living costs, and then see how much spare cash you have to invest. You should avoid having to access the money you're investing, as it may not reach its full potential if you do.

Seek financial advice

By seeking financial advice, you'll be able to discuss all the points raised above and ensure that your investments are tailored exactly to your needs

Oyster Bay Risk Profiler tools are available to help judge your attitude to investment, please feel free to use this tool and if you need advice please contact us.