Deciding where to invest your money should be something you carefully consider and making an investment plan can help to clarify the process and track your investments going forward.
Whether you’ve decided you’re ready to invest, or you are still thinking about it, considering the following steps might help you work out if it’s right for you:
1. Assess your financial situation – Draw up a budget outlining your income and outgoings, to see how much you can realistically afford to invest each month (or if you have a lump sum set aside, do you also have at least three months’ worth of essential expenditure in an emergency savings account). This might mean you factor in an initial timeline for paying off any debts or building an emergency fund before you invest. The last thing you want to do is to put yourself into financial difficulty, so be brutally honest with yourself.
2. Outline your investment goals and timelines – What are you investing towards, how much do you want to invest, and over what timeframe? You may find that you want to have both short-term and long-term investment goals, but mapping out what you want to achieve will help you to choose the right investment.
3. Diversify your investments – One of the secrets to successful investing is investing in a spread of investments. So rather than placing all your eggs in one basket by focusing on a single company, for example, you invest in a variety. It’s simple to do this by choosing a ready-made portfolio of investment or a single multi-asset fund, for example. Read more in our guide Investing jargon explained.
4. Decide what you want to invest in – The opportunities for investments can seem endless, but there are some key types you might want to consider, including shares, funds, trusts, and bonds. It’s worth spending some time learning about each of these and working out which ones appeal to you. You can read more about the different types of investments in our article Investing – the basics.
However, a fund is usually a good option. It can hold dozens of company shares, and may be particularly suitable if you’re just starting out. Funds are a way to spread risk, without relying on the fortunes of a single company. If you buy a managed fund, they also pass on the responsibility of choosing shares to an expert manager.
5. Manage and track your investments – If you’ve found an investment that you’re comfortable putting your money into, then sit back and relax. You may want to check its performance every six months or so, but try not to get bogged down in monitoring day-to-day performance as it can take time to produce gains.