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.
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, an investment adviser 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 a decision like this can seem like a major step, but with our help and investment advice, building up a portfolio of good-quality investments is an achievable ambition.
The value of investments and the income from them may go down. You may not get the original amount invested.
An individual savings account (ISA) is basically a tax wrapper. This means that whatever is within it is tax free. Any growth is tax free, and you will not be liable to any form of tax on any withdrawals. The only tax that could possibly be levied on an ISA is inheritance tax (but that’s another conversation). If it is a bank account then it is known as a cash ISA, if it is an investment, then it is an investment ISA or also sometimes referred to as a Stocks and Shares ISA. Each adult has an annual limit of £20,000 that can be invested this way.
With such investments, your capital is at risk and the value can fall as well as rise. You may receive less than you originally invested.
Yes. This is a fundamental part of investing. Over the long term (at least 5 years) we have seen the values of investments generally grow. This is because they are invested in assets and the value of these assets has grown above the rate of inflation over time. There are no guarantees though and sometimes we see the value drop. It’s important that anyone who is investing understands that your values can go up as well as down and you may get back less than you invested.
A good adviser will help you understand this and also help you to understand why this happens sometimes. If you are happy with the long-term approach, the past has shown us that riding out the short-term storms can result in overcoming these drops in value. Past performance is no guarantee of future performance.
Yes, depending on where you invest. It can take a couple of weeks to arrange a sell down of your investment and then a transfer to your bank account, but you can get it out if necessary. This need comes into the discussion you have with your adviser. You should retain a cash reserve to cover emergencies since the whole concept of investing is built around long term.
When investing, your capital is at risk and the value can fall as well as rise. You may receive less than you originally invested.