Five steps to investment success

1.  Have rainy day savings

The value of your investments can just as easily go down as up, so having other savings for an emergency is important.

2.  Work out your attitude to risk

While funds with the potential to grow your money rapidly can seem attractive, they can often to be volatile.  Some investors prefer a steadier ride.

3.  Pick a selection of funds

Spreading your money across geographical regions and types of asset such as shares and bonds should mean they don’t all rise and fall at the same time.  Known as diversification it is the principle of not putting all of your eggs in one basket.

4.  Set up regular savings

Regularly saving into funds is often more effective than putting in a single lump sum.  You can invest as little as £25 a month into each fund, depending on the fund you choose.  Regular saving means investors benefit from “pound cost averaging” which means you buy more fund units when they are cheaper and fewer when they are more expensive.  It also means you don’t have to try to time the market and risk investing a lump sum just before a stock market drop.

5.  Check your investments

Check a few times a year to see that you are still happy with your choices and to make adjustments if required.

John BaxterComment