Money Matters

The world of investments can be a tricky one to navigate, so Lisa de Silva has shed some light on some potential options with her very accessible, easy to understand, handy guide to investing

With low interest rates and rising inflation, many people are looking at ways to make their savings work harder for them. Traditionally, money invested in shares has outperformed money in savings accounts, making investments an attractive proposition.

Yet, investments do not offer a guaranteed return and to get the best returns you must take the greatest risks. Those tempted would be wise to consider the following:  What are your investment goals? If you are nearing retirement, it wouldn’t be wise to expose your savings to huge risk.  How long are you happy to tie up your money?  Are you prepared to stay in for a minimum of five years and accept the ups and downs of the markets?  Can you afford to lose your money?  Will you create and manage your investment portfolio yourself or will you use a professional?  Are you aware of the fees involved for the different buying and selling platforms? SHARES

ISAs (INDIVIDUAL SAVINGS ACCOUNT) A good place to start an investment journey is with an ISA. All adults have a £20,000 annual ISA allowance, which means you can invest up to this amount in any tax year and pay no tax on any gains you make. You can save into a stocks and shares ISA, keep emergency money in a cash ISA or if saving for your first home, a Lifetime ISA, which benefits from additional government contributions.

Companies issue shares to raise money. Investors buy them in the hope that the company performs well, and the shares increase in value. You can make money when the share price increases and when the company pays dividends. Dividends are paid A good place to from any profits the start an investment journey is with an ISA company makes. Shares are traded on the stock exchange and prices reflect the overall economic climate, social and global trends, along with a specific company’s financial health. Prices can go up and down and the risk level is high.

FUNDS Funds can invest in anything from countries to energy companies to gold. Your money is pooled with that of other investors and a specialist fund manager actively buys and manages the investment. While the fluctuations in funds can be smaller, you will have to pay fees on managed funds. Alternatively, you can invest in an exchange traded fund (ETF) that invests in a pool of companies that track a specific index, like the FTSE 100 tracker for example. ETFs are traded like normal shares and are cheaper than managed funds. DIY investing is like tending an allotment – it takes time and energy

BONDS A bond is issued when you lend your money to a company or country for a specific amount of time for a guaranteed return. You can also receive interest payments on the money. Less risky than shares, but the returns are more modest.

PRECIOUS METALS Gold and silver are seen as a haven for money when the markets are doing badly. Buying into a fund that tracks gold will provide a balance to any stocks and shares investments.

NON-MAINSTREAM INVESTMENTS These can include cryptocurrency, fine art, wine, vintage cars and even handbags. Highly speculative, these investments require specialist knowledge to minimise risk.

DIY Vs MANAGED INVESTMENTS Vs ROBO-ADVISORS DIY investing is like tending an allotment – it takes time and energy. The cheapest way to trade is through an online trading platform. Be aware that you will pay charges when using the platform, buying shares and if buying funds, you will incur management fees.

Do-It-For-You investing involves a professional actively managing your portfolio. This can incur high fees but could also bring higher returns.

Do-It-With-You investing allows you to buy a ready-made portfolio via a robo-advisor. This is selected for you according to the level of risk and the length of time you are prepared for and is cheaper than a managed portfolio. l

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