How To Reduce Risk When Choosing An Investment
When it comes to investing your money, it is natural to be nervous – it is important to consider what is best for you. While there are no cast iron guarantees there are some ways to reduce the risk when investing your money and in this article we are going to look at some options available to you.
While saving accounts are the lowest risk they tend to also offer the lowest return. However, it is advisable to have one as this can be vital when you need to get something in the short term.
A bond is a medium risk investment – the benefit of having them is they tend to have less of a swing in value compared to stocks or other higher risk options.
Stocks are likely to be the highest risk option in any portfolio. However, this is not to say you shouldn’t have them just to be aware of this when trading them and it is not recommended you put too much into them as if a stock fails to perform you could potentially lose everything.
Alternative investments can potentially be very risky. However, if you want something different on your portfolio this should be treated in the same way as stocks as this will reduce any negative impact on your finances.
Collective/pooled investments are one way you could potentially reduce risk- a fund manager takes the money from a number of investors and looks for investments on their behalf.
Some people may look at this and think “But can you trust the manager?” As with any business it is important to do your research before putting your money into a collective fund.
Spread the risk
A range of investments and a broad portfolio can help – a mixture of low and high means you are more likely to get a return and it also means that your finances are not dependent on one set of circumstances.
Keep an eye on your investments
While this may sound obvious sometimes it is good to increase or decrease the amount you put in depending on how well the investment is doing. An adviser should be able to offer advice to make it easier to gauge this but ultimately it is worth keeping an eye on current events and situations that could potentially affect what you invest in.
What is your goal?
Of course, the tempting obvious answer to “how much do you want to earn?” is “As much as possible?”
While it would be great if it were that simple the truth is you need to decide what you want and what you are prepared to risk for it.
This is where it helps to get the right advice. At Larcomes Financial Services we have both the specialist experience and the resources to help give you what you need to make an informed decision.
Contact us today and we will be happy to discuss your financial needs and goals in more detail!