How to best invest in your future
Are you enjoying your savings account or ISA's interest increase? No? What do you mean it hasn't happened'¦?
As people across the land are discovering, when the interest rate goes up businesses are quick to tack it on to money you owe, but aren’t exactly rushing to do the same when it comes to savings.
The problem with the rubbish savings rates of the past decade has been the increase in normally cautious investors taking bigger risks to beat inflation. And worrying, I’m increasingly being asked about investing in crypto-currencies like Bitcoin (don’t).
A recent survey found that huge numbers of people had completely unrealistic expectations about their investments – the average anticipated returns being 9%. These expectations are usually linked to low-risk investments and are hopelessly optimistic. Greater returns are possible – but are fraught with risk.
As I always say, if you’re taking out a high-risk investment, you’ve got to be prepared for losing some or all of it. Medium to high-risk investments are not for novices – and you can’t complain solely about underperformance because it’s not generally guaranteed. You can, however, complain about being mis-sold. The rules around selling investments in the UK are among the most comprehensive on earth.
Now the vast majority of financial advisers do a great job. But it pays to be completely honest about your inexperience if you’re considering taking out single or multiple investments. A good adviser should suggest a balanced ‘spread’ of investments so any losses are outweighed by safer things like bonds and gilts. They should fully assess your financial situation, give you time to consider it and tell you exactly what to expect for the risk level you agree on.
If you’re looking for good, independent financial advice, speak to friends and family for recommendations. But be cautious and always check if the adviser is regulated and what other customers have said about them online. Check out MoneySavingExpert or the Money Advice Service for options.
Advisers used to make their money largely from commission, but the rules changed to stop that as there was an incentive for less scrupulous ones to go for policies that paid out more. Now you have the option of paying the cost of seeing a financial adviser upfront, on a percentage of what you invest or even hourly rates.
Financial advisers have to give you lots of information, including:
*Clear details about how they will charge you for their services and what it will cost.
*A key facts document that explains what they’re proposing you purchase,
*An assessment of the suitability of the investments and the risks that you’ve agreed beforehand.
*Time to think about it before signing up and details of your right to change your mind.
*Details of their regulatory status and how you can make a complaint.
Most importantly, you have the right to ask for further clarity if you don’t understand anything. Loads of people don’t feel that they can do this but it’s vital! As a nation, even the most pushy or outspoken of us can stay silent about nagging doubts in the face of an ‘expert’. But this is how people get in to money trouble. If you’re paying for advice, make them work for it!
It’s becoming increasingly difficult to predict how the markets will perform in these volatile times. So take professional advice if you’re going to have a punt on investments – and make sure you understand the risk – don’t just focus on the returns.