Assess your financial position and attitude to risk
Introducing investment
Your financial position - where are you now?
When thinking about what to do with your money, it is important to consider your personal circumstances. There are four main areas to think about:
What if...
I'm unclear about my financial situation?
When considering whether or not to invest, it is wise to contact a qualified financial adviser, particulary if you are investing for the first time..
Your adviser will be able to assess your financial situation and recommend investments suitable for your needs.
If you would like to assess your current financial position, the Money Advice Service provides a useful Financial Health Check tool.
Your financial position - where would you like to be?
If you decide that you are in a position to invest, the next thing to think about is: "What am I investing for?" This will help you to choose the most suitable type of investment for you. If you have a particular goal (eg. saving for your retirement or to cover university fees), you will need to think about how much you can afford and how long it might take you to achieve your goal. This is covered in greater detail here.
How much risk are you prepared to tolerate?
When deciding whether to invest, a key question to ask yourself is: "How comfortable would I be facing a short term loss in order to have the opportunity to make long term gains?"If you are not prepared to take any risk whatsoever, then investing in the stock market is not for you. However, if you are going to invest, you need to be prepared to take some risk in the hope of greater reward. You must be prepared to see at least some fall in the value of your investment without panicking and be willing to hold on in the hope of future gains.
If at any time you are unsure about how much risk you are prepared to take, you should seek professional financial advice.