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Getting ready to invest

  • 3 min reading time
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Before you start investing, it's important to think about what you would like to achieve in life and your personal approach to risk. Here's our guide to preparing to invest.

What you will learn

  • How to prepare for investing
  • What questions you should ask
  • How to find adviser if you need it

You may be ready to start your investment journey, but how can you make sure you're setting off in the right direction? We look at how you can get on the right path.

Get ready to invest

Before you invest for the first time, it is important to lay some groundwork. That means looking at your existing debts and focusing on paying off any high-interest credit card bills or loans.

It can take time to sell investments and get access to your money, so it's essential to put some savings aside for a rainy day – usually this is enough to cover living expenses for a few months.

Then it's time to think about why you want to invest. What goals are you saving for in life? And, now you have spare cash, how long can you afford to invest it for?

Did you know?

Saving for a house deposit is becoming more challenging. In England and Wales, a full-time employee could expect to pay about 7.8 times their annual wage on their home in 2017 – an increase of 2.4% on 2016.

Choose a strategy

Having a clear understanding of your goals will help you decide whether you are seeking investments which provide an income or growth (you can read about the difference between income and growth here).

That means asking yourself:

  • If you're seeking a regular income from your investments?
  • Would you prefer to leave your investment to grow over time?
  • And, do you know which types of investments can give you an income, growth or a combination of the two?

Decide on a level of risk

Every investment carries some risk. As a guide, riskier investments offer the potential for better growth, but also a higher chance that your investments might go down in value.

Finding the right level of risk for you means asking yourself:

  • How comfortable are you with risk?
  • How much can you afford to lose?
  • How long would it take you to recover from a loss?
  • How long can you put your money away for?
  • Could you still achieve your investment goals by taking a more cautious approach?

Seek expert help if you need it

It's also important is decide whether you will manage your investments yourself, or if you want to seek expert advice. You can read about the pros and cons to both approaches here.

However, there are four points to consider:

  • What is your level of investment knowledge?
  • How much time do you have to learn about and manage your investments?
  • Would you find it stressful to make investment decisions in what can be a fast-moving marketplace?
  • Is the amount you are planning to invest enough to justify the level of fees that an advisor would charge?

The cost of advice varies – but the average hourly rate for financial advice in the UK is about £150. You may also be charged a fee for a set piece of work or a regular fee based on the amount of money you want to invest.

The above information is not exhaustive, but it will help you think about your reasons for investing, your personal goals and your preferred approach, so you can begin to make informed decisions about your money.

Risk notice

Any information provided should not be considered personal advice. Past performance is not a guide to future performance. You may not get back the full amount you invest. If you have any doubts about making your own investment decisions, seek financial advice.

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