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 goals and understand your own risk tolerance. Consider the questions below to help you get started.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
What is your attitude to risk and potential returns?
All investments carry a trade-off between risk and reward. Generally, the more risk you’re willing to take, the greater your potential can be for significant growth—but also, the higher the chance of losses.
For example, if you’re nearing retirement, you may want a lower risk approach, to avoid losses that you won’t be able to recoup. If you don’t need to access your money for many years, you may prefer a higher risk approach, knowing you can adjust your strategy over time.
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 investment choice will depend on whether you want your investment to increase (in other words, give you capital growth) or whether you would prefer an investment that can give you regular payments (that’s to say, a steady income). Generally speaking, younger investors are normally interested in capital growth, while older investors may rely on income from their investments to finance some of their everyday spending. Some investors may prefer a balance of both growth and 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 property sale, 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 may be a balance of what’s affordable within the overall scope of your finances.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time and depend on personal individual circumstances.
