What do you need to consider when you're working out your investment strategy? We take you through the basics.
Investing is all about creating the right strategy for you. It's important to establish your investment goals and the level of risk you're willing to take from the start. Here, we help you take control of your investment plans.
Income or specific goal
The first thing to think about when setting your investment strategy is to decide what you're investing for:
Your life stage
Next up, you need to consider that your financial goals will differ at different stages in your life (and of course, you can have more than one goal):
The length of time you have to meet your goals also plays an important part in shaping your investment strategy:
Your investment strategy needs to reflect the amount of money you need to reach your goal.
You need to be realistic about the amounts involved, and whether they're likely to go up. This is particularly important for long-term goals, such as funding school fees and generating income for retirement.
If you have goals with a shorter timeframe you may not want to take much risk, as your investments will have less time to recover from sharp falls in markets. If you're investing for a longer period of time, such as for retirement, you might be comfortable taking more risk with your investments.
Secondary school fees
If you were investing to fund school fees from the age 11 and started when your child was born, your investments would have a relatively long time to grow. You might consider investing in a Stocks and Shares ISA and/or investment bonds across a range of asset classes, choosing investments in line with your attitude to risk.
If you wanted to fund your child's university education and started investing when they were born, your investments would have even longer to grow and to ride out ups and downs in the market.
Including a higher proportion of shares in an investment strategy offers more potential for growth, but also the potential for greater losses. You should consider your attitude to risk, your financial position and your goal then tailor your investments around this.
40 years to go
Investing via a pension is often the most tax-efficient way of saving for retirement. ISAs are another tax-efficient way of boosting your retirement income.
5 years to go
Moving into investments which are more closely aligned to your retirement income goals is one way to make sure you're cushioned from the impact of ups and downs in the market.