Taking stock

Consider this: Are you in a position to invest?

If you're in a lot of debt, the answer is probably 'no', and it makes sense to take care of what you owe first – because you’re likely to be paying a higher rate of interest than any return you could get on an investment.

It’s also important to make sure you’ve got some cash savings to fall back on before you commit money to longer-term plans.

If you’re financially fit, then start with your end goal in mind. Ask yourself what you're investing for.

Right now, you could be saving for a deposit on your first house, marriage or a honeymoon. Over the next 20-25 years, it’s likely you’ll have different objectives, like paying off a mortgage or building up your pension pot.

It’s important to have a roadmap of your financial goals laid out – from the short- to long-term. This roadmap will help to determine the type of investments that are best for you.

You need to be prepared to put away your money for at least five to 10 years to have the best chance of getting a good return on your investments.

If you’ll need the money before then, you’re best sticking with cash.

Your tolerance for risk

Your roadmap will help determine your appetite for risk, and that’s likely to vary depending on the timescale for each objective. The longer you’ve got, the more risk you can afford to take.

All investing involves some level of risk. Put simply, the more risk you take, the greater the potential for better returns. But the flip side is greater volatility – the value of your investment will go up and down more frequently.

That’s why you can’t afford to take much risk if your time horizon is less than five years. For achieving your longer-term goals, the trick is to not be put off by volatility and remember that it comes with the territory.

Your investment strategy

Now that you know why you’re investing, how long for, and what risks you can afford to take, you’re ready to put together your portfolio.

A portfolio is simply the collection of investments you’ve chosen – and they typically fall into one of four main ‘asset classes’. An asset class is a group of investments that share similar characteristics and tend to behave the same way.

Cash (bank accounts)

Cash is the ultimate safe haven for cautious savers who want to take very little risk. It’s the right home for money that you know, or think, you might need in the short term – say, within five years.

You’ll earn a return through the interest paid on your account, but it’d be worth hunting around to find the best interest rate you can find. Since the global financial crisis more than a decade ago, interest rates have been stuck near all-time lows, with little prospect of them rising significantly anytime soon.

You also can’t afford to ignore the threat of inflation, which will gradually erode the spending power of your money unless the returns you’re getting are better.

Bonds (fixed income)

Companies and governments borrow money to help fund their activities and obligations. They issue this debt as bonds, also called fixed-income investments, which investors buy.

Most bonds run for a fixed period and the idea is that, on maturity (the agreed timeframe of the lending), the investor gets back the capital they lent. In return for lending money to the company or government, the investor receives a regular fixed income payment, which is also known as a ‘coupon’.

Just like any other loan, the risk is that the borrower defaults and doesn’t pay the coupon or repay the capital. Companies are therefore graded depending on their credit rating. Those with a good credit rating will pay a lower level of income.

On the opposite end, with higher-risk companies there is a greater chance of not getting your money back, so they must pay a higher level of income to compensate investors for the risk they’re taking.

For the same reason, loans to governments like the UK or US are viewed as the safest type of bond. You can be confident you’ll get your money back, so they pay the lowest coupon.

Overall, bonds tend to be less volatile and are therefore seen as lower-risk investments. They are often more popular during times of economic uncertainty as investors seek a fixed return on their money.

Equities (shares)

Equities, or shares, are investments in companies that are listed on a stock exchange. As the name suggests, you are buying a ‘share’ in that company.

The price of a share can fluctuate, depending on the performance of the company or how the market believes it is likely to perform. This fluctuation in the value of the investment is called volatility.

The return on a share is made up of two elements: share price growth and dividends.

Dividends are a share in the company’s profits; these are usually paid out twice a year and can be an important part of the total return to investors over the longer-term, due to the power of compounding (reinvesting the returns from dividends into more shares).

Equities are higher-risk investments than cash or bonds and therefore have the potential for greater rewards over the longer-term.

Alternative assets

This group really covers everything that hasn’t been listed above. Alternative assets include commodities such as gold, timber, and infrastructure; as well as commercial property and private equity, which is investment in unlisted companies.

These investments often require a longer time horizon because they can be more illiquid, which means it’s not always as easy to access your money.

Alternatives have different attractions, and risks, to the three other asset classes – and so can help diversify your portfolio if your risk profile fits.

Diversification is the key

‘Don’t put all your eggs in one basket.’ It might sound old-fashioned, but it’s one of the most important things to consider when it comes to investing.

You should spread your investments as widely as you can to help manage risk. That way, while they might not all be going up in value at the same time, they’re also less likely to all be heading down together.

The easiest way to achieve a diverse portfolio is to invest your longer-term money in collective investment funds.

These pool together your money with that of thousands of investors. This way, you can invest in a much wider spread of assets than you could individually. It also provides the potential to benefit from professional management of the underlying investments.

Final tips

Educate yourself as much as you can – and be clear on what you’re looking to achieve and the risks you’re prepared to take.

Finally, never invest in something you don’t understand.

 

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. 

An investment in equities will not provide the security of capital associated with a deposit account with a bank or building society.

Taking stock

Consider this: Are you in a position to invest?

If you're in a lot of debt, the answer is probably 'no', and it makes sense to take care of what you owe first – because you’re likely to be paying a higher rate of interest than any return you could get on an investment.

It’s also important to make sure you’ve got some cash savings to fall back on before you commit money to longer-term plans.

If you’re financially fit, then start with your end goal in mind. Ask yourself what you're investing for.

Right now, you could be saving for a deposit on your first house, marriage or a honeymoon. Over the next 20-25 years, it’s likely you’ll have different objectives, like paying off a mortgage or building up your pension pot.

It’s important to have a roadmap of your financial goals laid out – from the short- to long-term. This roadmap will help to determine the type of investments that are best for you.

You need to be prepared to put away your money for at least five to 10 years to have the best chance of getting a good return on your investments.

If you’ll need the money before then, you’re best sticking with cash.

Your tolerance for risk

Your roadmap will help determine your appetite for risk, and that’s likely to vary depending on the timescale for each objective. The longer you’ve got, the more risk you can afford to take.

All investing involves some level of risk. Put simply, the more risk you take, the greater the potential for better returns. But the flip side is greater volatility – the value of your investment will go up and down more frequently.

That’s why you can’t afford to take much risk if your time horizon is less than five years. For achieving your longer-term goals, the trick is to not be put off by volatility and remember that it comes with the territory.

Your investment strategy

Now that you know why you’re investing, how long for, and what risks you can afford to take, you’re ready to put together your portfolio.

A portfolio is simply the collection of investments you’ve chosen – and they typically fall into one of four main ‘asset classes’. An asset class is a group of investments that share similar characteristics and tend to behave the same way.

Cash (bank accounts)

Cash is the ultimate safe haven for cautious savers who want to take very little risk. It’s the right home for money that you know, or think, you might need in the short term – say, within five years.

You’ll earn a return through the interest paid on your account, but it’d be worth hunting around to find the best interest rate you can find. Since the global financial crisis more than a decade ago, interest rates have been stuck near all-time lows, with little prospect of them rising significantly anytime soon.

You also can’t afford to ignore the threat of inflation, which will gradually erode the spending power of your money unless the returns you’re getting are better.

Bonds (fixed income)

Companies and governments borrow money to help fund their activities and obligations. They issue this debt as bonds, also called fixed-income investments, which investors buy.

Most bonds run for a fixed period and the idea is that, on maturity (the agreed timeframe of the lending), the investor gets back the capital they lent. In return for lending money to the company or government, the investor receives a regular fixed income payment, which is also known as a ‘coupon’.

Just like any other loan, the risk is that the borrower defaults and doesn’t pay the coupon or repay the capital. Companies are therefore graded depending on their credit rating. Those with a good credit rating will pay a lower level of income.

On the opposite end, with higher-risk companies there is a greater chance of not getting your money back, so they must pay a higher level of income to compensate investors for the risk they’re taking.

For the same reason, loans to governments like the UK or US are viewed as the safest type of bond. You can be confident you’ll get your money back, so they pay the lowest coupon.

Overall, bonds tend to be less volatile and are therefore seen as lower-risk investments. They are often more popular during times of economic uncertainty as investors seek a fixed return on their money.

Equities (shares)

Equities, or shares, are investments in companies that are listed on a stock exchange. As the name suggests, you are buying a ‘share’ in that company.

The price of a share can fluctuate, depending on the performance of the company or how the market believes it is likely to perform. This fluctuation in the value of the investment is called volatility.

The return on a share is made up of two elements: share price growth and dividends.

Dividends are a share in the company’s profits; these are usually paid out twice a year and can be an important part of the total return to investors over the longer-term, due to the power of compounding (reinvesting the returns from dividends into more shares).

Equities are higher-risk investments than cash or bonds and therefore have the potential for greater rewards over the longer-term.

Alternative assets

This group really covers everything that hasn’t been listed above. Alternative assets include commodities such as gold, timber, and infrastructure; as well as commercial property and private equity, which is investment in unlisted companies.

These investments often require a longer time horizon because they can be more illiquid, which means it’s not always as easy to access your money.

Alternatives have different attractions, and risks, to the three other asset classes – and so can help diversify your portfolio if your risk profile fits.

Diversification is the key

‘Don’t put all your eggs in one basket.’ It might sound old-fashioned, but it’s one of the most important things to consider when it comes to investing.

You should spread your investments as widely as you can to help manage risk. That way, while they might not all be going up in value at the same time, they’re also less likely to all be heading down together.

The easiest way to achieve a diverse portfolio is to invest your longer-term money in collective investment funds.

These pool together your money with that of thousands of investors. This way, you can invest in a much wider spread of assets than you could individually. It also provides the potential to benefit from professional management of the underlying investments.

Final tips

Educate yourself as much as you can – and be clear on what you’re looking to achieve and the risks you’re prepared to take.

Finally, never invest in something you don’t understand.

 

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. 

An investment in equities will not provide the security of capital associated with a deposit account with a bank or building society.

Taking stock

Consider this: Are you in a position to invest?

If you're in a lot of debt, the answer is probably 'no', and it makes sense to take care of what you owe first – because you’re likely to be paying a higher rate of interest than any return you could get on an investment.

It’s also important to make sure you’ve got some cash savings to fall back on before you commit money to longer-term plans.

If you’re financially fit, then start with your end goal in mind. Ask yourself what you're investing for.

Right now, you could be saving for a deposit on your first house, marriage or a honeymoon. Over the next 20-25 years, it’s likely you’ll have different objectives, like paying off a mortgage or building up your pension pot.

It’s important to have a roadmap of your financial goals laid out – from the short- to long-term. This roadmap will help to determine the type of investments that are best for you.

You need to be prepared to put away your money for at least five to 10 years to have the best chance of getting a good return on your investments.

If you’ll need the money before then, you’re best sticking with cash.

Your tolerance for risk

Your roadmap will help determine your appetite for risk, and that’s likely to vary depending on the timescale for each objective. The longer you’ve got, the more risk you can afford to take.

All investing involves some level of risk. Put simply, the more risk you take, the greater the potential for better returns. But the flip side is greater volatility – the value of your investment will go up and down more frequently.

That’s why you can’t afford to take much risk if your time horizon is less than five years. For achieving your longer-term goals, the trick is to not be put off by volatility and remember that it comes with the territory.

Your investment strategy

Now that you know why you’re investing, how long for, and what risks you can afford to take, you’re ready to put together your portfolio.

A portfolio is simply the collection of investments you’ve chosen – and they typically fall into one of four main ‘asset classes’. An asset class is a group of investments that share similar characteristics and tend to behave the same way.

Cash (bank accounts)

Cash is the ultimate safe haven for cautious savers who want to take very little risk. It’s the right home for money that you know, or think, you might need in the short term – say, within five years.

You’ll earn a return through the interest paid on your account, but it’d be worth hunting around to find the best interest rate you can find. Since the global financial crisis more than a decade ago, interest rates have been stuck near all-time lows, with little prospect of them rising significantly anytime soon.

You also can’t afford to ignore the threat of inflation, which will gradually erode the spending power of your money unless the returns you’re getting are better.

Bonds (fixed income)

Companies and governments borrow money to help fund their activities and obligations. They issue this debt as bonds, also called fixed-income investments, which investors buy.

Most bonds run for a fixed period and the idea is that, on maturity (the agreed timeframe of the lending), the investor gets back the capital they lent. In return for lending money to the company or government, the investor receives a regular fixed income payment, which is also known as a ‘coupon’.

Just like any other loan, the risk is that the borrower defaults and doesn’t pay the coupon or repay the capital. Companies are therefore graded depending on their credit rating. Those with a good credit rating will pay a lower level of income.

On the opposite end, with higher-risk companies there is a greater chance of not getting your money back, so they must pay a higher level of income to compensate investors for the risk they’re taking.

For the same reason, loans to governments like the UK or US are viewed as the safest type of bond. You can be confident you’ll get your money back, so they pay the lowest coupon.

Overall, bonds tend to be less volatile and are therefore seen as lower-risk investments. They are often more popular during times of economic uncertainty as investors seek a fixed return on their money.

Equities (shares)

Equities, or shares, are investments in companies that are listed on a stock exchange. As the name suggests, you are buying a ‘share’ in that company.

The price of a share can fluctuate, depending on the performance of the company or how the market believes it is likely to perform. This fluctuation in the value of the investment is called volatility.

The return on a share is made up of two elements: share price growth and dividends.

Dividends are a share in the company’s profits; these are usually paid out twice a year and can be an important part of the total return to investors over the longer-term, due to the power of compounding (reinvesting the returns from dividends into more shares).

Equities are higher-risk investments than cash or bonds and therefore have the potential for greater rewards over the longer-term.

Alternative assets

This group really covers everything that hasn’t been listed above. Alternative assets include commodities such as gold, timber, and infrastructure; as well as commercial property and private equity, which is investment in unlisted companies.

These investments often require a longer time horizon because they can be more illiquid, which means it’s not always as easy to access your money.

Alternatives have different attractions, and risks, to the three other asset classes – and so can help diversify your portfolio if your risk profile fits.

Diversification is the key

‘Don’t put all your eggs in one basket.’ It might sound old-fashioned, but it’s one of the most important things to consider when it comes to investing.

You should spread your investments as widely as you can to help manage risk. That way, while they might not all be going up in value at the same time, they’re also less likely to all be heading down together.

The easiest way to achieve a diverse portfolio is to invest your longer-term money in collective investment funds.

These pool together your money with that of thousands of investors. This way, you can invest in a much wider spread of assets than you could individually. It also provides the potential to benefit from professional management of the underlying investments.

Final tips

Educate yourself as much as you can – and be clear on what you’re looking to achieve and the risks you’re prepared to take.

Finally, never invest in something you don’t understand.

 

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. 

An investment in equities will not provide the security of capital associated with a deposit account with a bank or building society.

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