Your investment goals
Investors can be divided into two very broad groups: those investing to generate an income, and those looking for growth.
Income investors generally include people about to embark on retirement who are looking to secure a regular income to help boost their pension. Growth investors will be people who have longer-term investment timescales, who are looking to maximise the value of their assets.
Growth can mean different things to different people, so it is important to set out your goal from the outset. This will help a financial adviser work out your ‘attitude to risk’, which in turn will help them recommend the most appropriate investments to reach your goals.
So, what is ‘attitude to risk’?
Basically, it is a term used to describe the amount of risk an investor is prepared to take according to their ability to tolerate market ups and downs.
There is a relationship between risk and return – generally speaking, the greater the risk you take, the greater the potential return. But of course, this goes both ways as the greater risk you take, the greater the potential for loss. However, the lower the risk you take, the lower the potential return.
To illustrate this, let’s look at cash and equities.
People invest in deposit based cash accounts as they provide security of capital; cash deposits allow easy access to money at any time. However, over the longer term, inflation eats into the value of this cash and interest rates fluctuate.
Equities, on the other hand, fluctuate in value every day – actually, every minute. If you invest today, you may find that tomorrow, next week, next month, even next year, your capital is worth less than you invested. However, if you can stick with it, hold your nerve, sit back and ride out the ups and downs, over the long term, the general trend has been upwards – and much more positive than both cash and inflation.
Take some time to establish your goals before you make any decisions and decide your position with regards to your attitude to risk.
In all cases, it is always recommended you consult a professional adviser to ensure you get the choices right.
For more help and advice please do not hesitate to contact Paul Hokin direct at Hoskin Financial Planning.
Mobile: 07734 906264
Office: 01621 767200