Items to consider before making an investment decision
With so much to choose from, the world of investing can be confusing at times. To help, it's important that you define your investment goal and understand your own risk profile.
Take a look at the questions below to help you get started.
- What is your attitude to risk and potential returns? (expandable content)
All investments carry a trade-off between risk and reward. The more risk you’re willing to take, the greater the opportunity for significant capital growth, and unfortunately, the greater the scope for losses. For example, if you’re nearing retirement, you may want a lower risk approach, to lessen the possibility of your final retirement pot being eroded. Alternatively, if you don’t need to access your money for some years, you may prefer a higher risk approach, knowing you can adjust your strategy over time.
BlackRock offer funds that span right across the risk spectrum. Visit the products section to learn more.
- How long do you want to invest for?
Your reasons for investing, e.g. school fees, retirement income or a second home can influence how long you invest for. It’s important to know your timescale. One to three years? Three to five years? Five years or more? In general, the longer you invest for, the more opportunity you have to ride out any periods of market volatility.
- Are you investing for capital growth, income or both?
Your choice of fund will depend on whether you want your savings to increase (in other words, give you capital growth) or give you regular payments (that’s to say, a steady income). Generally speaking, younger investors are normally seeking to accumulate wealth and will be primarily interested in capital growth. By contrast, older investors often rely on the income from their investments to finance some of their everyday spending, and will want that income to be as high as possible. Some investors may prefer a balance of both growth and income.
BlackRock has a range of equity funds focused on delivering capital growth and a selection of equity income funds that aim for income and long-term capital growth as well as a range of bond funds that aim to produce a high level of income.
- Do you want to invest a lump sum or save regularly?
It’s important to decide on the amount and frequency of your investment. Maybe you have a lump sum from an inheritance, or the disposal of property. Or you’re looking to invest a regular amount from your salary. Or perhaps you’d prefer to make irregular ad hoc payments. Your final decision is a balance of what’s affordable within the overall scope of your finances.
- Are you confident to choose your own funds, or do you need advice?
Experienced investors may wish to apply their own skill and judgement when making their fund choice. Others consider it wise to consult an independent financial adviser. Indeed, many lifelong investors find it valuable to compare notes with a professional who has access to the most up to date market information. There are also investors who are confident in their choice of investment management company, but prefer to have their precise portfolio of funds chosen on their behalf.
If you would like to use a professional financial adviser, visit getting advice for more information.