How to find the right investment for you

In the wake of the Woodford debacle, there’s a lot of talk around investments and the basis for choosing them. So we thought it would be helpful to outline what you should be thinking about when it comes to selecting an investment to enable you to get the best outcomes for your money.

Review your goals

It sounds obvious, but taking the time to think about what you want from your investments is key to choosing the correct fund for you. Jotting down your needs, your goals and how much risk you are prepared to take is an excellent starting point.

Consider your investment’s lifespan

How soon will you need your money back? Timeframes will vary between goals and will affect the level of risk you are prepared to take. For example:

• If you’re saving for a pension to be accessed in 30 years’ time, you can take no notice of short-term falls in the value of your investments and focus on the long term. Over longer periods, investments other than cash savings accounts typically deliver a better chance of beating inflation.

• If your goals are shorter term, i.e. saving for a house move in three years, investments such as funds and shares might not be appropriate as their value can fluctuate, so it may be best to stick to cash savings accounts.

Make a plan

Once you’ve established your needs, goals and risk levels, developing a plan can help you to find the sort of investment that’s best for you. Low risk investments such as Cash ISAs are a good place to start. After that, it’s worth adding some medium-risk investments such as unit trusts if you’re comfortable with higher volatility.

Adding higher risk investments is something you’ll only really want to do once you’ve built up a few low to medium-risk investments. However you should only do so if you’re willing to accept the risk of losing some or all of the money you put into them.

Diversify, diversify, diversify

You’ve almost certainly heard it before, but diversifying is a key part of investment planning. It’s a basic rule that to improve your chances of better returns, you have to accept more risk. Diversification is an excellent method that improves the balance between risk and return by spreading your money across different investment types and sectors.

Dodge high risks

As stated above, it’s best to avoid high-risk investments unless you’re willing to accept the chance that you might not see any returns or even lose your investment. Adverts that proclaim to offer high levels of return will rarely come without risk and we’d urge caution before investing in anything that you’re not 100% certain about. If you do decide to pursue a high-risk investment, it’s vital to make sure you fully understand the specific risks involved.

With all investments comes a degree of risk, and returns can never be wholly guaranteed. The value of your investment (and any income from it) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

For more information, do get in touch, we’d love to hear from you. You can call us on 01789 263888 or email hello@charterswealth.co.uk.

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