If you have savings for emergencies and you have money left over every month after you have covered your living costs, then you might want to consider investing.
Contrary to popular belief, you do not need a great deal of money to start investing, but we suggest you ask yourself the following questions before making the decision to invest.
Investment involves risk. The value of investments can go up and down, which is why investors should only consider doing so if they have paid off all of their existing debts, apart from their mortgage.
An investment might not offer you a return that is more than the interest you pay on debts, which is why you should be debt-free before you start.
What’s an ISA? An ISA is an individual savings account and it’s a tax efficient way to save or invest. If you want to invest in a stocks & shares ISA, a cash ISA or a combination the two, you must be a UK resident and aged over 16 for a cash ISA, and 18 for a stocks & shares ISA.
A stocks & shares ISA is a tax efficient way to invest. It offers greater potential for growth, but there is also a risk that your investment could fall in value.
Your total ISA allowance for the whole tax year (6 April 2017 to 5 April 2018) is £20,000. You can split this between a cash ISA or a stocks & shares ISA, however you can only contribute to an ISA with one provider during each financial year.
Do you have enough money to cover emergencies – a broken-down boiler or washing machine, car repairs, bereavement-related expenses etc.? We recommend you do not invest until you have enough money to cover emergencies.
If you do not have cash savings and an emergency arises, then overdraft fees or the interest on a loan or credit card might cost more than the money you would make from your investment.
The longer you invest your money, the lower the risk that you’ll potentially make a loss. Every investment market has its ups and downs. You should only consider investing money that you can afford to leave alone for the next 5 to 10 years.
You can’t invest without some degree of risk. Before you invest your money, you need to understand and be comfortable with the kind of risks each investment involves.
In general, the more risks you take, the higher the potential return. But always bear in mind that there’s a greater chance that you’ll lose some or all of the money originally invested.
Here are some things to think about when you consider how much risk you are prepared to take:
With any investment, there is a risk that you might lose some or all of the original amount you invested in addition to any growth or income that you may receive from your investment.
You need to think about what this could mean to you. All losses – small or large – will have an impact on your financial wellbeing and your future.