With interest rates currently low, being a keen saver isn’t on its own likely to be enough to secure your financial future. If you were to put all your money into a savings account, you’d find that its longer-term value would be eroded by inflation. This means that as each year passes, your money buys less.
By contrast, investing in its simplest form is when you buy something that you hope will increase in value over the years. For some people, investing is about growing their money for the future, for others it’s about generating an income they can access now.
Contrary to what many believe, you don’t need to have a large lump sum put aside to start investing. However, you do need to be aware that unlike cash savings, investments come with the additional risk that their value can fall as well as rise.
Before you begin, there are some important points you should consider. You’ll need to ensure that you have ready access to a cash fund to cover everyday living expenses and unforeseen expenditure. Obviously, there’s no point rushing into investment if you’ve got substantial debts, or if you know you’re going to have to make major financial commitments that will take up all of your spare cash.
As stock market performance is unpredictable, successful investing is all about adopting a longer-term view, and also means introducing an element of risk to your money. Prudent investment involves diversifying your risk by spreading your investments across different sectors and markets, and giving your money time to grow.
Putting a plan in place
There’s a vast array of choice when it comes to investing. So deciding at the outset what you want your investments to achieve, and over what timescale, is important because it will help in determining where to put your money.
Whether you’re new to investment, or consider yourself a seasoned stock market investor, want to put away regular amounts or have a lump sum to invest, we can recommend an appropriate strategy for you. We’ll explain the important features of different types of investments like stocks and shares ISAs, unit trusts, open-ended investment companies and bonds, and the part they can play in a successful investment strategy.
Taking the decision to invest money can seem like a major step, but with our help and advice, building up a portfolio of good-quality investments is an achievable ambition.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
Investors do not pay any personal tax on income or gains, but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA managers.
Tax treatment varies according to individual circumstances and is subject to change.