investments and financial advice

Before establishing your own personal savings strategy it is essential that you appreciate risk in the context of the investment you are about to make; some basic pointers:

Every investment carries some risk; some carry much more than others
Initial or first-time investments tend to lean towards lower risk products
Higher return means you will be taking more risk
Generally you can absorb more risk if you have a longer term investment horizon, i.e. you do not expect to cash in your investment in the shorter term
Being able to choose when you wish to cash in reduces risk, i.e. not having to sell when markets are low
Investing gradually (e.g. regular savings schemes) reduces the risk of buying at the wrong time
Investing in fixed rate products removes the risk of interest rates changing, e.g. term savings accounts and Gilts
Spreading your investments across products and providers reduces your risks, i.e. don't put all your eggs in one basket
Investing in so-called Tracker funds can remove the risk of picking the wrong stock or the wrong fund manager
Investing in overseas assets adds the risk of foreign currency movement

The level of risk you are prepared to take will be a personal decision influenced totally by individual circumstances. However, in developing your own personal savings strategy it often simplifies the process to consider investments by degree of risk. One very basic method is to group types of investment into categories, e.g. low, medium and high.

Investments in a lower risk strategy might include Government backed products such as Gilts, national savings accounts, certificates and bonds, instant access accounts, savings accounts, and Cash ISAs
Investments that tend towards a medium risk strategy might include Tracker funds, Balanced funds, ISAs that invest in Tracker or Balanced funds and a balanced portfolio of individual stocks and shares or funds
Individual stock picking is at the higher end of the investment risk scale as are specialised investment funds, e.g. technology or "small cap". Be aware that higher expected returns carry higher risk

How much risk you wish to take in your strategy will always be a balancing act between the goals you wish to achieve, the amount of risk you are prepared to accept and the possible returns commensurate with that level of risk. Note the tax-free allowances available to you each year when drawing up your savings plan.

For further information on all of the above referenced products, please go to the Information Centre.

With an appreciation of how investment risk relates to your savings strategy you should now be better prepared when Selecting Investments and Creating a Portfolio. Click here to continue.

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