How To Choose The Right Investment For You

When you are thinking about investing your money, you’ll probably come across lots of advice telling you this one is best, or that one is best. It can quickly become bewildering. But it’s important to bear in mind that just because you hear that one area is the safest and most profitable, that doesn’t necessarily mean it’s the right investment for you.

The right investment will depend on many factors that are particular to you. These elements include how much capital you have to more personal considerations like your age. So, before you invest your hard-earned money, shut out the noise and just focus on what it is that you need and want from your investment. To help you get closer to finding the right venture for you, here are some questions that you should ask yourself.

How much capital do you have to invest?

The most logical starting point is to consider your financial situation.

Most potential investors have it in their heads that you need money to make money. But in this day in age this is not always the case. The internet has made it much easier for many people to invest, not just the well off. For example, it is now much easier to enter the stock market due to the increasing use of online brokerages. Accounts can be set up for a small amount of money, and sometimes for free. And there are other ventures that only require small but steady contributions, like cash ISAs.

However, you may be in the situation where you have a lump sum of money to invest. Therefore, you may be more interested in putting it towards a corporate bond or the deposit for a property.

Whether you have a little or a lot, you can invest. However, the amount of capital you have will determine whether you can make an investment that requires a one-off payment or on-going contributions.

How much risk are you prepared for?

As I’m sure you know, some investments are very risky. However, if everything goes well, these ventures can be extremely lucrative. Others are safer, offering a definite a return but one that may be lower than their risky counterparts. It is important to consider how much risk you are willing to take on.

Let’s take the example of stocks and bonds. Shares have the potential for high returns. However, because stock prices can fluctuate drastically, in the worst case scenario the value of your shares could drop so much that you may end up selling them at a loss. On the other hand, bonds give a guaranteed return, however that return tends to be lower than that earned on shares.

Your personal circumstances will  play a big part in determining how much risk you are willing to take on. If you have a family to support or are close to retirement, you may be more inclined towards a low-risk product that is short term. Young professionals, on the other hand, are more willing to take on longer-term higher risk investments.

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How much effort are you willing to contribute towards your investment?

Some investments are more demanding than others.

Many people choose to invest in property. If they have enough capital to pay the deposit and other associated expenses, it can be a lucrative investment and provides the buyer with a regular income. This kind of venture does involve a lot of effort. You have to locate a property, or properties, that will be easy to rent and increase in value when it comes to selling. Some investors will choose to work with home building businesses like Aveling Homes to create a brand new property that they guaranteed to sell or rent. And if you let out the property, you have to be prepared to take on the costs and responsibility that comes with being a landlord.

On the other hand, there are products that require less of a commitment. These include cash ISAs and many pension investment options.

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How much time do you want to invest for?

Some investment options are really only suitable for the long term. Because the value of shares tend to increase over the long-term, but see-saw in the short-term, they are considered a good option if you don’t require a speedy return. Indeed, the advice is that you should view the stock market as a five year investment, at least, if you want to get a good return. A longer term investment like this will be suited to people who are saving for a large future expense like a new home or their children’s education.

If you want a short-term venture or something flexible, you may be more suited to products such as stocks and shares ISAs or a cash ISA. These products allow you to get access to your money when you need it while paying a competitive interest rate and helping to limit your liability for tax. These options are often the best option for people looking for funds for a smaller expense like travelling abroad, home improvements or a new car.

It is very important to consider what you are investing for so that you can determine when you might need access to your money. Otherwise, you could find yourself having to pay a penalty for withdrawing money from an inflexible product. It’s always a good idea to find out what the implications are for exiting a potential investment early.

What investment is right for you?

Once you’ve answered these questions, you may be closer to determining what investments are right for you. The next step towards your final decision is to discuss your options with a financial advisor. These professionals will be able to provide you with more detailed and accurate information on what is right for you and your future. They may suggest that a combination of investments or a “portfolio” may be the safest and most lucrative way to achieve your goals.

Good luck and thank you for reading our latest post.

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