With the interest rates on savings accounts being so low at the moment, more and more of us are considering investing as an alternative way for making our money grow.
For those asking, “Should I invest?”, there are a few areas that are important to think about first. If you can tick these three points off, you should be in a strong position to start your investment portfolio right away.
1. Having enough cash savings
Before you start plunging your money into investments, it’s important to make sure you have plenty in your savings account first. Ideally, you should have six months’ worth of expenses saved as a safety net in case anything unexpected happens with your job, health, family circumstances, etc.
When it comes to investing, it’s important to keep in mind that you are taking risks. None of us likes to gamble with our savings, but the truth is there’s no such thing as a no-risk investment. While sensible investors are unlikely to lose everything they invest, there is always a risk which is why it’s important to have stable savings to fall back on.
2. Conducting enough research
If you are an investing beginner, do not start investing your money until you have properly researched the stock market and the type of stock or share you are looking to invest in.
It’s worth reading the latest news articles and key investor information documents (KIID) to start with.
3. Leaving your money untouched
On the whole, investing is a long-term financial plan, and you’ll probably want to leave your money untouched for 5-10 years. Longer investments should help you to ride out any volatile periods in the market.
Stock market investments may beat inflation and interest rates over time, but there’s always a risk that when you need to sell prices could be low. This could result in you getting a poor return or even losing money.
When getting started with investing, it’s a good idea to spread your risk by putting your money into a number of different products and asset classes. This should mean that if a certain investment doesn’t work out the way you had hoped, you’ll have others to fall back on.
Should I invest?
Hopefully, this article will have helped you to figure out whether you’re in a strong position to start investing. It’s definitely a good avenue to explore, but it’s important to know what you are doing and have plenty of savings if you’re going to go for it.