Balancing act

You’ve worked hard for your money – now investing can get your money working harder for you.

Before investing, you need to decide how much risk you’re willing to take and consider your ability to deal with any losses. Some investors are happy to take higher risk if there is a chance for higher returns over the longer term, while others don’t want to accept any risk. Others may sit somewhere in the middle.

To start with, consider your financial goals. If your financial goals are shorter term, such as saving for a holiday, it’s unlikely that you’ll want to take any risk and might prefer to keep your money in a savings account. If you have a longer-term goal, you may be willing to accept higher risk in exchange for potentially better returns.

When considering investing, it’s important to think about whether you could afford to lose your money or manage financially if your investments fell in value. Would your lifestyle be impacted? Are others financially dependent on you? Your own financial situation will impact your approach to investment.

Whilst most investments carry the risk that you may not get back the amount you invested, some types carry more risk than others. The general rule of thumb is that the greater the risk, the greater the potential for return – but also the greater the potential loss. The less risk you take will generally reduce potential losses but offer less potential returns.

When you invest, the value of your investment will fluctuate. Some investors are comfortable with this over time, while others may prefer to see less or no fluctuations. You need to be happy with the level of risk you are taking.

So, how do you understand investment risk? Trying to understand and decide on the level of risk you’re willing to take can be a difficult task. Understanding some of the risks that an investment could be exposed to could help you decide. Growth from your investment cannot be achieved without exposure to some risk.

Some investment funds are riskier than others, so how do you decide which investments are best for you? One way of balancing potential returns whilst limiting risk is to spread your money across different types of investment. This is called ‘diversification’, which essentially avoids putting all your eggs in one basket.

If it feels like your savings aren’t earning as much as you’d like and you’d like to make your hard-earned money work harder for you, be sure to contact financial advisors Matt Begley or Steve Rusga to review your investment objectives.

Risk warning:

Information is based on Harris Begley’s current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. Although endeavours have been made to provide accurate and timely information, Harris Begley cannot guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation. Harris Begley cannot accept responsibility for any loss as a result of acts or omissions.