With interest rates
offering little to get savers excited, now may be a good time to look at other
options.
If you are a first time
investor, you may be feeling nervous about taking the plunge. There are a
range of low risk investments to help you take your first steps into investing.
Here are some tips to
get you started.
You Will
Need Some Cash (So Make It Work As Hard As It Can)
Having cash to hand acts
as a buffer against life's ups and downs. How much cash you need to keep
depends on your situation. Some people like to keep a 2-3 months’
salary.
That being so, it is a
good idea to make your cash savings work as hard as they can.
From Autumn this year,
ISAs (Individual Savings Accounts) will become more flexible. You will be
allowed to withdraw and replace money as you wish.
The only condition is
that the net contributions stay within the ISA limit for any given year. This
means that all or part of your ISA allowance can essentially be used as a
standard savings account. It will have the benefit of allowing you to
receive interest on your savings without paying tax.
Look At
Government-Backed Schemes
Every now and again,
governments introduce schemes to encourage saving and/or investing.
At the moment,
first-time buyers building a deposit for a house might like to look at the
“Help To Buy ISA”. This scheme is due to start in autumn this year.
In short, for every £200 saved, the government will add £50, up to a maximum of
£3000.
The government also
recently ran a “Pensioner Bonds” scheme for over 65s. This is currently
closed, but given its huge popularity, it is entirely possible that it will open
again.
It is always worth
keeping an eye open for government-backed schemes as they may offer special
benefits.
Make Your
Investments Match Your Needs
There is a huge range of
investment products available.
Instead of thinking in
terms of “good” and “bad”, think in terms of “appropriate” or
“inappropriate”. In order to decide whether or not an investment is
appropriate, you will need to start by considering your current
situation.
In particular, you will need
to be realistic as to whether you should start investing right now. If you have
high-interest debts, you may be better to spend any spare cash you have, on
paying them down first.
Once you are ready to
start investing, you will need to think about your short-, medium- and
long-term goals. You will also need to be realistic about your attitude
to risk.
You may have heard the
expression “the value of an investment can go down as well as up”. This
is true. It is also true that some investments carry more risk than
others. Some people are happy to accept higher risk for the possibility
of higher reward. Other people prefer to take a safer line in their
investment strategy.
Of course it is
perfectly possible to divide your investment funds between investments with
different levels of risk.
Diversification
And Dividends – The Two Pillars Of Investment
You have probably heard
the saying “don't put all your eggs in one basket”. This often holds true
for investments. Putting all your money into high-risk investments
creates the risk of losing it all.
By contrast, putting it
all into lower-risk investments means you can miss out on some great
returns.
By having a mixture of
investments of different degrees of risk, you can have the best of both
worlds.
Also remember that
investments can be for growth or income or a mixture of both. Many listed
companies pay dividends to shareholders. These can be reinvested for more
growth or used as income.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY
GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
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