Before investing, there are several steps that you should take before embarking on the journey. The following guide and key steps will help you find the investment that is right for you.
Review your needs and goals for the investment – It’s important to analyse and audit the1 outcome from your investment. It will allow you to fully understand what you really want from your investment, both in the short and long term. For example, knowing how much you have available to invest is a good way to start planning.
How long can you invest? – Consider how long you need to get a return on your investment. Knowing how soon you need to get money back is a good way to decide what type of investment is best for you. In cases where you are saving for your pension, which could be in 30 years, you can focus on long term results rather than short term value on your money. On the other hand, if you are saving for a cash deposit for a house in the next 2 to 3 years, it’s best to go for a cash savings account like a Cash ISA or IFISA (Innovative Finance ISA).
Have an Investment plan – After assessing your risks and goals and how much risk you are willing to take, the next step is to make an investment plan. Sites like Quickisa can help you find the best ISA rates available with the help of industry experts. They will help you understand your options and the types of products available to you.
Diversifying – One of the golden rules of investing is to diversify. You have to be willing to take more risk if you want to improve your chance of a better return on your investment. This risk can be better managed by spreading your investment across different types and channels. It stops you “putting all your eggs in one basket”. So instead of investing all you £20,000 tax-free allowance into one ISA, you can spread it across several e.g. by putting £10,000 into a cash ISA, £5,000 into an IFISA and another £5,000 into a Stocks & Shares ISA.
Check the charges – Make sure you understand the charges you’ll pay before committing your money into an investment. In most cases, when you buy an investment, you will need to use the services of a stockbroker and will have to pay dealing fees. Charges will vary from firm to firm whether you are using the help of a stockbroker or a financial advisor.
Avoid high risk products – Avoid investments that are high risk unless you totally understand the risk involved as well as the consequences. It is usually best to build up your money in a low and medium risk investment before you consider high risk products.
Review on a regular basis – It is vital to review your investment periodically every six months or once a year to make sure your investment or investments are performing well. This gives you an overview of your plan so you can make necessary adjustments where possible in order to reach your investment goals. In most cases, you will get regular statements to help you make this decision.
Note: As with all investment, your capital is at risk. The value of your investment could go down as well as up and you may get back less than you invest.