How to start an investment portfolio
Most of us would like to be comfortably-off financially. With interest rates low, being an enthusiastic saver isn’t on its own enough to secure this goal. If you put money in a savings account its value will be eroded by inflation.
Investing means introducing risk to your money. This is not necessarily a bad thing, as increased risk can help you grow your money. But, conversely, there is of course the possibility that you could lose some, or all, of your cash. Stock market performance is unpredictable. Investing is all about adopting a longer-term view, diversifying risk, and giving your money time to grow.
A FEW DECISIONS TO CONSIDER
Firstly, you need to be clear why you’re investing and what your goals are. Your adviser will want to know what your plans are so that they can develop the right strategy for you.
Next, you should decide how much you have to invest and how long you want to invest for. Will you invest a lump sum or make regular contributions? By regularly investing, you even-out the peaks and troughs in prices.
A portfolio that includes a range of assets such as shares, bonds, property, and cash, has been shown to perform better than one that is only invested in one type of asset. This process is known as asset allocation and is almost always the starting point that any financial adviser will take when helping clients decide where to invest.
Working with your financial adviser, you will need to establish how much risk you’re comfortable with and the impact that has on the rate of return you can realistically expect to earn. You should bear in mind that the level of return can vary from year to year and that past performance is not a guide or a guarantee of future returns.
Investing money can seem like a major step, but with help and advice from a professional adviser, building up a portfolio of investments isn’t an unrealistic ambition.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.