Investments

Investment Strategies

Choosing the Right Investment Strategy

How do you choose between building societies and bank deposit accounts, unit trusts, insurance bonds, national savings, and ISAs, when investing for your future? Each has its advantages and disadvantages.

It is rarely sensible to have all your eggs in one basket. Wise investors will ‘spread’ their money amongst several different kinds of investments.

Each investment has its own particular place in a properly constructed portfolio, but how does the investor choose the best balance?

Building society or bank deposit accounts are the automatic choice for many investors as they are safe, dependable and can offer easy access to your money. But remember you are planning for the future and interest rates are variable.

If you withdraw the income each year, even with modest inflation, there is the risk that the ‘real’ value of the capital invested in a deposit account is being eroded.

While in recent years we have seen relatively low rates of inflation, it is not so long ago that inflation rates were in double figures. Historically, the best method of protecting the purchasing power of capital, over the longer term, has been by investing in areas linked to stockmarkets. Of course, with stockmarket based investments you are exposed to risk since share prices can go down as well as up.

Whilst it is impossible to guarantee future growth, stock market investment has generally provided favourable results over the longer term. Shares should, therefore, be considered in any well-diversified investment portfolio.

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You can reduce the risk of investing in shares by putting your money into professionally managed funds such as unit trusts and insurance bonds.

Whilst you cannot eliminate the risk entirely, you can take out investments, which are widely spread both geographically and across different sectors.

Before investing in this area, there are a number of things to consider :

The most important of these is to seek advice so that your objectives can be correctly identified.
The types of investment you need to make will depend on what you want for your future. A Wardour adviser will help you strike the right balance to ensure your attitude to risk is correctly identified and adhered to on an ongoing basis, not just at outset.