Top investment tips for 2016

Top investment tips for 2016

The year 2016 holds lots of promise for individuals,families and business organisations.While there is so much promise for the year,its important to learn the art of converting promise into real quantifiable value.Below are some tips and key steps to help find the right investment for you.

Review your needs and goals – Its well worth taking the time to think about what you really want from your investments.This involves knowing yourself,your needs and goals and your appetite for risk.

Consider how long you can invest – Think about how soon you need to get your money back.Time frames vary for different goals and will affect the type of risks you can take.If you are saving for a house deposit and hoping to buy in a couple of years,investments such as shares or funds will not be suitable because their value goes up or down.If you are saving for your pension in 25 years time,you can ignore short term falls in the value of your investments and focus on the long term. Over the long term, investments other than cash savings accounts tend to give you a better chance of beating inflation and reaching your pension goal.

Make an investment plan – Once you are clear on your needs and goals and have assessed how much risk you can take,then draw up an investment plan.This will help you identify the types of product that could be suitable for you.A good rule of thumb is to start with low risk investments.Then,add medium risk investments like unit trusts if you are happy to accept higher volatility.

Diversify – Its a basic rule of investing that to improve your chance of a better return you have to accept more risk. But you can manage and improve the balance between risk and return by spreading your money across different investment types and sectors whose prices don’t necessarily move in the same direction.It can help you smooth out the returns while still achieving growth and reduce the overall risk in your portfolio.

Check the charges – If you buy investments like individual shares directly,you will need to use a stockbroking service and pay dealing charges.If you decide on investment funds,there are charges for example to pay the fund manager. Whether you are looking at stockbrokers,investment funds or advisers,the charges vary from one firm to another.Ask any firm to explain all their charges so you know what you will pay before committing your money. While higher charges can sometimes mean better quality,always ask yourself if what you are being charged is reasonable and if you can get similar quality and pay less elsewhere.

Investments to avoid – Avoid high risk products unless you fully understand their specific risks and are happy to take them on. Only consider higher risk products once you have built up money in low and medium risk investments. Some investments are usually best avoided altogether.

Categories: Financial tips