by Catherine Thomas-Humphreys (www.thefinfluencer.co.uk)
10 questions to ask yourself before beginning to invest:
- Emergency saving: Do I have sufficient cash savings to use in an emergency and for specific short term goals that I’ve set in the next few years?
- Purpose of investing: What’s my reason for investing? Is this for my retirement or for a goal I have for 5+ years?
- Risk tolerance: Am I comfortable taking a level of risk with some of my money? Investment values can rise and fall – do I feel comfortable with this?
- Capacity for loss: Can I afford to lose some of this money? Would losing some of this money in the short term affect my day to day standard of living today?
- Investment understanding: Do I understand this investment? Do I know how this investment works, what its invested in and what risk level it is?
- Product tax rules: Do I understand the tax rules related to this Investment? Pensions and ISAs are known as Tax Wrappers. Do I understand which taxes do and don’t apply to this investment?
- Can I get my money out easily: For example property is less “liquid” than shares, bonds. How long until I can get this money back if needed?
- Are these investments regulated: Can I see the provider and product is regulated by the FCA.
- Am I protected: If my chosen provider goes out of business, am I covered by the FSCS government compensation scheme?
- Should I get financial advice: Do I feel confident enough to continue investing or should I seek advice? Is my situation particularly complex, has multiple goals or am I looking to invest a significant sum?