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tekilochka [14]
3 years ago
5

What should an investor consider when making an investment? Check all that apply.

Social Studies
1 answer:
Nookie1986 [14]3 years ago
8 0

Answer:

Explanation:

1. Review your needs and goals

It’s well worth taking the time to think about what you really want from your investments.

Knowing yourself, your needs and goals and Your appetite for risk is a good start, so start by filling in a Money fact find.

2. 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 on. For example:

If you’re 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. Stick to cash savings accounts like Cash ISAs.

If you’re 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.

3. Make an investment plan

Protect yourself

Avoid unsolicited investment offers.

Before investing check the FCA register and warning list.

If you’re considering an investment offer, seek impartial advice.

Once you’re clear on your needs and goals – and have assessed how much risk you can take – 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 such as Cash ISAs.

Then, add medium-risk investments like unit trusts if you’re happy to accept higher volatility.

Only consider higher risk investments once you’ve built up low and medium-risk investments.

Even then, only do so if you are willing to accept the risk of losing the money you put into them.

4. Diversify!

It’s 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 – this is called diversifying.

It can help you smooth out the returns while still achieving growth, and reduce the overall risk in your portfolio.

5. Decide how hands-on to be

?

If you need help understanding a financial product, get financial advice before you buy.

Investing can take up as much or as little of your time as you’d like:

If you want to be hands-on and enjoy making investment decisions, you might want to consider buying individual shares – but make sure you understand the risks.

If you don’t have the time or inclination to be hands-on – or if you only have a small amount of money to invest – then a popular choice is investment funds, such as unit trusts and Open Ended Investment Companies (OEICs). With these, your money is pooled with that of lots of other investors and used to buy a wide spread of investments.

If you’re unsure about the types of investment you need, or which investment funds to choose, get financial advice.

Read our independent guide on Popular investments at a glance

6. Check the charges

If you buy investments, like individual shares, direct, 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.

And, if you get financial advice, you will pay the adviser for this.

Whether you’re 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’re being charged is reasonable and if you can get similar quality and pay less elsewhere.

Learn more on Understanding investment fees

7. 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’ve built up money in low and medium-risk investments.

And some investments are Usually best avoided altogether.

8. Review periodically

Research shows that investors who watch their investments day to day tend to buy and sell too often and get poorer returns than investors who leave their money to grow for the long term.

Regular reviews – say, once a year – will ensure that you keep track of how your investments are performing and adjust your savings as necessary to reach your goal.

You will get regular statements to help you do this. Find out more below.

However, don’t be tempted to act every time prices move in an unexpected direction.

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