How Investments works
Whether you want to build a pension for retirement, save a deposit for a house or generate extra income to cover an expense, any savings you may have been able to accrue that are not required to fnance your day-to-day living may provide a more substantial return if you invest them.
What you need to know
Before you start investing, frst make sure that you can afford your essential living costs, as well as any debts. It’s also a good idea to make sure you have some savings to cover emergencies.
Have a think about how much risk you feel comfortable taking with your money. You should also consider your other fnancial commitments when deciding how much risk to take. If you don’t want to or can’t take any risk with your money, then investing may not be for you right now
The longer your money is invested, the more opportunity it has to grow in value and reach your goal. Each year, not only will the money you invest potentially grow in value, you’ll also potentially get growth on any previous growth. This is commonly known as ‘compounding’, and over longer time periods it can make a significant difference to the value of your investments.
The final value of your investments will depend on three main factors: how much you pay in, how your investments perform, and how long you’re invested for. Generally speaking, the more you pay in, the better your investments perform. And the longer you can keep your money invested, the more you’re likely to get back at the end.
Putting all your money in one type of investment can be a risky strategy. You can help reduce that risk by spreading your money across a mix of investment types and countries. Different investments are affected by different factors: economics, interest rates, politics, conflicts, even weather events. What’s positive for one investment can be negative for another, meaning when one rises, another may fall.
You can do this by putting your money into your pension or using up your Individual Savings Account (ISA) allowance.
Make time to regularly review your investments to check they’re on track to meet your goals.
Learn more about Inheritance Tax
Our website offers information about investing and saving, but not personal advice. If you’re not sure which investments are right for you, please request advice, for example from our financial advisers. If you decide to invest, remember that investments can go up and down in value, so you could get back less than you put in.