There are hundreds of different options for investing – from ready made portfolios to doing it all yourself. We’ve compiled some of the best investments for different scenarios to help you choose what to do with your money to get the most out of it. We’ve also jotted down some key things you’ll want to consider when deciding how to invest – everyone is different, has different circumstances and risk appetites, so it’s important to think individually about what you do rather than copy others.
How to make smart investment decisions
No one has the right answer, otherwise we’d all be rich! There are, however, ways to make sure that your investment decisions are smart every time. This is different from decisions being right every time. Don’t assume that a decision that goes wrong wasn’t a smart decision at the time, with the information available at the time. Here are some things to keep in mind when investing.
1. Find out which investment option suits your needs
There are a lot of financial tools for you to choose from that have the potential to grow your investment. Working out which one is best suited to your current financial situation is the first step. Read our guides to get an idea of which products suit you best.
2. Compare providers who offer the services
Once you’ve settled on an investment option, you should compare the providers in that area. Look at cost, but also things like flexibility, frequent trader rates, ease of access. There are a lot of considerations to make, our tables and guides aim to make this process a bit easier.
3. Choose the option best suited to you
Once you’ve done your homework, it’s simply a case of signing up to the provider of your choice. Apply directly through our tables, and you’ll be up and running in no time! Always double check (or triple check) that you’re happy with your decision, and if you’re uncertain seek financial advice.
Key things to consider when choosing the best investments:
There are a couple of things you need to consider when choosing the best investments.
Have you got an emergency fund?
If you have a bit of cash floating about and don’t have an emergency fund, it could be worth putting it aside in an easy access savings account to make sure you can get hold of it if you need it.
Ideally you have a couple of months worth of living expenses set aside in case anything goes wrong, just to ensure that you’re covered.
Do you have any debt?
If you have any expensive debt like credit cards, loans, payday loans or anything else in that category, consider paying it off first. The likelihood is that you’ll save more money in interest on these balances than you’d earn on your investments.
How to choose the best investments for you
Nothing can be labelled as the “best investment”, mainly because it all depends on your situation, including how much money you’ve got and how long you plan to invest for.
How much do you have?
The amount you have available to invest makes a huge difference in what you’ll want to invest in – it’s partly due to risk, which we get onto a bit later, but also about how well you diversify your portfolio.
What's a diverse portfolio?
This is ultimately the entire definition of not putting all of your eggs in the same basket. It’s basically spreading your money between a bunch of different investments instead of investing all of your money in one thing.
It’s easy to think that giant established companies can’t fail, making them safe investments. But think about companies like Blockbuster. It was well ahead of its competitors but failed to adapt and, ultimately, failed as a company. Nowadays all that remains of Blockbuster is memories, and, for those who haven’t cleared their wallets out in a while, a dog-eared laminated card.
The more you spread out your investments, the less risk you are exposing yourself to. Of course, this means that your potential returns are lower.
For smaller sums: think about a robo-advisor
For a lump sum of £1,000 or less or regular investments of £200 per month, you might choose to invest with a “robo advisor”. These platforms do all the work for you based on your attitude to risk and investment knowledge and you can do the whole thing with a direct debit. Easy for “set and forget” investing. If you’ve not made use of your ISA allowance for the year, it’s a good idea to stick it in a stocks and shares ISA, too.
For larger sums, maybe invest for an income?
If you’ve got a larger sum, such as £10,000, lucky you! You could go with the robo advisor route with that too. You could choose to invest for an income. With £10,000 it’s not going to let you retire early, but it can certainly get you a few hundred pounds each year.
It’s worth looking into ETFs or index funds in more established industries if you want to do this. You’re looking for funds that pay higher dividends.
For really large sums, consider a financial advisor
If you’re lucky (or hard working) enough to have £50,000 to invest, you might want to consider getting yourself a financial adviser. Not that you couldn’t do it yourself, of course, but with such a large chunk of money, you might find value in someone else’s expertise (and save yourself a few headaches!). A financial advisor will help you build a portfolio that suits you, your investment needs and desires and that matches your attitude to risk. They can keep track of it and make changes to it to make sure it stays on track.
Or, if you’re feeling confident, do it yourself
If you do go with the DIY route, try not to play around with your investments too much. The stock markets move around a lot, so could find yourself obsessed with seeing how they’re doing, but if your investments are long term, there’s not much use faffing in the short term.
How long do you want to invest for?
This is a huge consideration when investing. If you reckon you’ll need the money in the next three years, it’s probably not a good idea to invest it. You’re better off looking for a high interest savings account to put it away. If you’ll need it soon, make sure it’s easy access.
For the really long term: think about your pension
If you’re not planning on touching the money until you retire and it’s quite a tidy sum, you could opt for a pension. Your money would be locked away until you turn 55, so you’ll need to be pretty sure that you won’t need it anytime soon. Maybe keep some of it back for a holiday.
For more than 5 years: how about shares?
If you’re not looking for anything so long term, but still have more than 5 years or so, you could invest in shares.
What are shares?Shares are little pieces of companies. Sometimes, when a company is doing really well and wants to grow even more, it floats on the stock market, also called “going public”. This means that the average day to day person (like you) can purchase little parts.
The price of stocks is part of how the company is valued and can range from pennies (penny stocks) to thousands of pounds.
If you choose to invest in shares, make sure you diversify your portfolio (read more about diverse portfolios above). You’ll need to find a trading platform that lets you buy and sell shares.
Most platforms let you search for shares in specific industries, or you can look at ones that have performed well recently.
Compare investment services
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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