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All about investment principles with Michelle Strelley.
How does investing work?
Quite simply, you put money aside to use in the future. You invest or buy something which you think will hopefully increase in value.
We always say it’s a good idea to keep an emergency fund to dip into if your car breaks down or you need a new boiler. But there’s no set amount to save. It’s individual to you and your circumstances. Over and above this you can invest, and try to make that money work for you as much as possible.
What are the main asset classes?
There are four big headings here: cash – which is the least risky, but because it’s low risk, it’s generally low reward. But it’s easy access and a good place for your emergency funds to be. We’re talking here about ISAs, current accounts, deposit accounts and national savings and investments.
Then there are equities – shares and things like that that tend to be higher risk. These are for people who are more adventurous, although people with a lower attitude to risk can use them to balance out their risk profile.
Next is property. People invest in Buy to Let property, residential homes or commercial property to benefit from rental income and potentially growth in value.
Finally there are fixed interest securities like gilts, which are effectively a loan from the government that pays a fixed rate of interest. These were historically called coupons because you actually had a coupon until the date of maturity. The other category here is corporate bonds, which are similar to gilts. They’re issued by a firm and you’re paid a pre-established number of interest payments, either fixed or variable. When it expires, your original investment is returned.
There are also a few alternatives like gold, art, even whisky – there are all sorts of investments. If you can buy it, you can probably invest in it.
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Aitana Financial Services was established in 1993, and today we cover the whole of the country, focusing on giving the best advice for your circumstances. We really pride ourselves on the quality of our advice, and it’s the reason we’ve grown through recommendations from happy clients.
What are the benefits and drawbacks of investing?
It depends which way you go. Each asset class comes with positives and negatives. Investing can be really rewarding depending on what you do and your attitude to risk.
Higher risk generally gives you higher possible rewards, depending on how the investment performs. As I said, cash is lower risk, with little reward, and inflation can erode the value of the interest you gain.
Property is a real asset that provides possible income and capital return, but the drawback is that you face higher stamp duty and Capital Gains Tax.
The best thing is to discuss your thoughts with us and we can explore the pros and cons together.
How can a financial advisor help a first time investor?
We would look together at your individual attitude to risk and your capacity for loss. We need to make sure that if you’re investing, you’re putting your money in the right place.
If you ask somebody why they want to invest, they will say that they want to make money – we all do. But when we drill down in a conversation with them, we find that everybody’s circumstances are different and their attitude will vary completely.
We’ve got the knowledge to guide you into the right place for investing, and we can hold your hand throughout that investment journey. You will gain annual reviews with a financial advisor, at the very least, but I’m always on hand to answer questions from my clients.
The value investments and any income from them can fall as well as rise. You may not get back the amount originally invested.
The information on this website is for use of residents of the United Kingdom only. No representations are made as to whether the information is applicable or available in any other country which may have access to it.
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