Investing: Where do I start?

Saving is the responsible thing to do in case of an unexpected expense. But you should also save for things you have planned, whether it is over the short-term for a holiday or for a longer-term objective like retirement or paying for your child’s education.

While saving is a good habit, simply leaving your savings in the bank may not earn you a healthy rate of return and it is unlikely to keep pace with inflation.

For most of us, investing – as opposed to simply keeping cash in a bank – is a crucial part of financial planning. While it can involve greater risk, it may also offer the chance of higher returns, giving you a better chance of building up wealth to fund your long-term goals.

Before deciding on a plan to achieve your financial goals, it makes sense to work with a Wealth Manager to understand your timeframe and appetite for risk, before determining the right blend of assets to match your needs.

Preparing to invest

Start with a review of your current financial position. This should include looking at your existing income along with any regular expenses or outgoings, and debts. It does not usually make sense to invest if you have high-interest debts such as credit cards to pay off. That is because the interest rate you’re paying may be higher than the returns you’re likely to achieve from investing.

Investments are a long-term decision, so you should also make sure you keep a separate emergency savings pot to draw on if you need cash urgently. How much you need to have depends on your circumstances, but generally you should have savings to cover at least three months’ worth of regular expenses.

Which kinds of investments might be most suitable for you?

It may be convenient for you to invest a lump sum if, for instance, you receive a windfall such as a bonus. You should bear in mind that, when investing a lump sum, you could be vulnerable to a sudden down-turn in the markets – so you should be comfortable with the risk level and have a strong conviction in your investment choice.

Some people find that making regular investments is better for their needs. Investing smaller amounts on a regular basis (say monthly) can smooth out the highs and lows of the price you pay for units in your chosen investment. It is also an extremely good way of disciplining yourself into saving as much as you should to ensure that you meet your long-term objectives.

Before deciding on the right plan of action for you in terms of establishing a regular investing routine, the first thing you must consider is the time frame associated with your plan, and how much money should you invest.

Once you have got to grips with this, you can start thinking about what kind of investor you are, and which investments might be most suitable for you.

This means considering your financial and life circumstances (which will affect your ability to take risks) and your personality and attitudes (since this affects how willing you are to take risks).

You should aim to hold a range of investments which perform differently in different circumstances, since this will increase your chances of earning good returns whatever happens to the economy. This is known as diversification.

The importance of advice

The idea of investing for the first time can seem a little daunting, but the days are gone when it was just for professionals and the very knowledgeable. Now you can let the professionals do it for you, whilst maintaining control and keeping a close eye on your progress.

Our qualified and experienced Wealth Managers have the skills to explain all of the options open to you and recommend solutions that you feel confident and comfortable with.

Over the years, the AAM Investment Research Team will work with you and your AAM Wealth Manager to provide ongoing advice and information to help your plans adapt as the economic environment and your circumstances change.

Book a complimentary financial review with one of our MAS licensed financial adviser representatives.

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