Many professional are a little apprehensive about how Brexit will affect their investments. When there’s a change in geopolitics, inevitably, there comes scaremongering, propaganda, hype. There’s certainly no exception with Brexit.
Should you invest or save?
If you invest, you essentially have the potential to make more money over the long term, and you have to accept that this brings a certain degree of risk. This is, of course, not guaranteed and is certainly riskier than simply putting your money away in a savings account.
The bigger the risk, the greater the potential for rewards, but also the greater the potential for loss! Especially in the short term. Investing should be for the long term – at least 5 years, ideally 10 or more.
We believe in protecting yourself as much as possible when it comes to investments and we’re sharing our 6 rules of investing
1. Risk tolerance
Can you afford and are you prepared to take a risk, and to what degree? This is your emotional view on risk and your financial capacity for loss! Your financial adviser will take all these factors into account to help establish, and agree with you, your overall attitude to risk.
Beware of the risk of inflation. Holding too much in cash is not totally ‘risk-free’, if the rate of inflation is higher than the rate you can earn in interest.
3. Contingency fund
Identify and keep a ‘contingency fund’ for life’s emergencies, including planned spending within the next 5 years. Typically, an emergency fund might be 6 months’ worth of outgoings. Don’t forget to factor in that car change or big holiday you’ve promised yourself!
Remember, it’s time in the markets that counts, not timing the markets. Knowing when to buy or sell an investment can be stressful, no-one can predict the future. It’s far better to use time – not timing – to your advantage. The longer you invest, the more likely you are to have the potential for a healthy return, regardless of short-term blips or fluctuations.
5. Surplus money
Only invest money surplus to what you require in your ‘contingency fund’. Keep enough in cash for your life’s emergencies and planned spending. That way you shouldn’t need to dip into your investments, especially if they are affected by short-term fluctuations.
6. Invest wisely
Don’t keep all your ‘investment’ eggs in one basket. Spread your investment around different sectors in order to benefit from diversification. If one investment falls, it could be counterbalanced by another.
Don’t concern yourself too much by the short-term noise or worry about volatility and market movements, week-to-week, month-to-month or even year-to-year. Instead, you should focus on your long-term goals. If you are investing with long-term objectives and you remain comfortable with your risk profile, there is little reason to deviate from the current strategy unless your circumstances change.
Unlike cash, investments carry additional risks. They can fall as well as rise, so remember you could get back less than you invest! If you are unsure of the suitability of an investment, please speak to your financial adviser.