Things to consider before investing

There are lots of different investment options available in the market. The right one for you will depend on a number of factors including your financial objectives, personal circumstances, your attitude to risk and how much you can afford to tie up in longer term investments.

We provide an execution only service i.e. we only carry out the instructions you give us and if you are unsure whether or not to invest you should seek appropriate financial advice. There are a number of important considerations that you should think about before investing, including the following:

Cash for emergencies

Have you got spare cash to fall back on? Before introducing any risk to your money, it’s sensible to have some accessible cash as an emergency fund for any unforeseen events. Generally, it’s considered appropriate to have at least three to six months’ worth of income available in a savings account. However you should consider what level of cash reserve is appropriate for your own circumstances and whether you will need the money for something else in the short term or in case of an emergency. Please remember that once your money is invested you may not get back the full amount you invest as prices can fall as well as rise.

Sort out any debt

It’s important to ensure that any debts are under control before considering investments. Interest payments on debts, particularly short-term loans and credit cards or store cards, are generally much higher than the potential returns you’ll get from any investments, and large debt repayments may stop you reaching your financial goals.

For help and advice on debt management please visit www.moneyadviceservice.org.ukthe Money Advice Service website who offer free and impartial advice on a number of financial matters.

Appropriate protection

Life insurance, critical illness insurance and income protection are areas you may want to address before thinking of investing, especially if you have a family or people who rely on you financially. Your work may offer these as benefits, but you should review the level of cover to ensure that you have adequate cover to suit your needs.

How long can you invest your money?

This will narrow down the type of product that will be suitable for you. You should only consider investing your money if you’re prepared to do so over the longer term.

Could you afford to lose some or all of the money you’ve invested?

You should only invest in a product with a level of risk that you’re happy with. The higher the risk, the higher the potential return, but also the higher the potential loss. There are no guarantees, so you’ll need to be prepared for the fact that, with any stock market-linked investment, values will fluctuate on a daily basis and you may get back less than you invested as prices can fall as well as rise.

It’s important that you see investments as something to consider in addition to savings, not as an alternative.

What is your attitude towards risk?

It’s important to consider how much risk you’re prepared to take with your money and you should only trade with money you can afford to lose.

When investing, consider creating a balanced portfolio of savings and different types of investments. Diversification can help reduce your risk.