Things to think about
Do not put all your eggs in one basket.
Lessons learned from the recent problems faced by Northern Rock customers are that even banks are not 100% safe. Under a depositor protection scheme only a certain amount of an individual’s capital is guaranteed should a bank collapse. Spreading investments and savings is a good tactic whatever the objective.
Risks and Rewards
The best investment or savings vehicle is one where you understand the risks and rewards and can rest easily. Everyone is different when it comes to attitude to risk. It depends on your nature, upbringing, experience, where the money has come from and what you are saving or investing for. Your financial adviser will help you understand your personal attitude to risk and therefore select the most appropriate types of investment for you.
Effects of Inflation
You want to make the most of your money, so you need to ensure that the value of your money at least keeps pace with inflation. As you might know, one person’s inflation is not another’s. It depends on lifestyle. If the price of petrol increases dramatically it has an immediate effect on car drivers but a smaller effect on people using public transport. So, again, making the right investment is important when aiming for an amount of growth or income.
Fluctuating Markets
You might have heard of the expression, ‘the value of your investments might go down as well as up’. Stock market performance tends to change on a daily basis. If you are looking for a short to medium term investment, i.e. less than five years, stock market investments are unlikely to be suitable. The value might go down and you are not guaranteed to get back what you invested. However, over the medium to long term stock market based investments have generally provided much better returns than traditional savings accounts.
