If you’re thinking about investing, it’s important to know where your money will be going. Put simply, what investments will you be buying? And what regions will you choose to invest in? The answer isn’t straightforward and will depend on a number of factors.
So, where should I invest my money?
Choosing what to invest in can feel overwhelming – after all, there are so many investments to choose from! Luckily, there are ways to help you narrow down the field.
What is your attitude to risk?
Before you buy any investments, make sure you gauge your risk appetite. In other words, ask yourself the following question: how much risk am I comfortable taking? If you’re a cautious person and can’t bear the idea of losing money, it could be wise to choose investments that experience little price fluctuations, like cash equivalents and bonds. Don’t know what bonds are? They’re essentially investment products created by governments and companies to raise money to fund significant projects. Put simply, buying bonds means you’re lending money to pay for these activities, and in exchange, you should get back the full amount you’ve lent plus some interest payments (yields). Bonds are relatively safe, but just like with any investments, returns aren’t guaranteed. On the other hand, if you have no issue seeing the value of your plan fluctuate, you could consider high-risk investments, like shares and property.
Do your stock market research
If you’re picking your own investments, you’ll need to spend some time researching countries, sectors, and companies worth investing in. Typically, you’ll need to have good knowledge of economics and accounting. But it doesn’t stop there! You’ll need to go through a set of company results and balance sheets to ensure you’re making the right pick. You’ll also have to keep a constant eye on what’s happening in the world since political and economic events could have an important impact on how your investments are performing. So, if a region experiences some trouble, it could be a good idea to review your investments and consider whether you need to adjust your plan accordingly.
Remember to diversify
Whether you’re a cautious or adventurous investor, it’s normally a good idea to have a diversified portfolio. If you only buy one or two investments or choose to invest in a single market, you’d typically be taking a considerable risk. Indeed, if your investments perform poorly, you could lose everything, so make sure you consider putting your eggs in different baskets and spread your money across investment types and regions. That way, the likelihood of losing everything would decrease since poorly performing investment would be balanced out by others doing well. An easy way to diversify your portfolio is to buy investment funds - these are like ready-made hampers full of different investments. In other words, by buying a single fund, you could be invested in hundreds of investments without the hassle of making individual purchases.
Investing is a long-term game, so if you want to maximise your potential returns, it could be wise to stick with your investments over a number of years. Many studies have shown that long-term investing is synonymous with higher chances of positive returns. So, when it comes to building your plan, try to pick investments you’ll be happy to keep over a number of years. As investing legend, Warren Buffett, says “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”
Should I do it myself or use an investment management service?
Once you have an idea of where to invest your money, it’s important to decide how you’ll be doing it. If you have enough time, confidence, and knowledge to do it on your own, then you could use a DIY platform and pick your investments yourself. However, if you’re too busy or not confident enough, digital investment services, like Wealthify, could help. All you need to do is choose how much to invest and the risk level you’re comfortable taking. We’ll do the rest, from building your investment Plan to managing it on an ongoing basis. And that’s not all. With Wealthify, you’re in control as you can check how your investments are performing at anytime, anywhere, and you can top up your plan whenever you like. You can even open an Ethical Plan where your money will be invested in companies that are committed to doing good.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.