A financial plan for your capital is a must if you are to make the most from the financial services industry. Ensuring you have researched all the options available to you and setting strategic goals for yourself will mean that you plans runs its course successfully and that you come out at the other end with a smile on your face. So what are the first things to consider?
Don’t put all your Eggs in One Basket
Striking a good balance between saving money and investing money is crucial to any financial plan. It is important, for peace of mind, that you have some of your money in a safe and stable savings account, here it can slowly accrue a little interest and is always there for you acting as a bedrock for your financial stability. On the flip side of the coin, you want some of your money working a little harder for you, in a Stocks and Shares ISA, for example. This balance signifies a sensible and measured approach to ensuring that you are doing all you can to maximise the performance of your financial plan.
Risk and Reward
When it comes to investing, the first thing to acknowledge is that different products come with varying amounts of risk and reward. A basic rule of thumb is to look at high risk investments as those that offer the largest potential gains, low risk investments, on the other hand, will yield lower returns. It may well be the case that you want to play it safe and only invest in low risk investments, but many people opt to spread their capital across a range of investments types. If you are planning to put some of your money into a high-risk investment, however, remember that you should only invest high risk with money you can afford to lose.
Short Sprint or Long Haul
Looking at the period of time you will be investing over is also an important factor. Some high risk investment last for only a day or two, this called day trading or swing trading and the potential gains are high, as are the losses. Longer investments tend to be lower risk, but the returns are also lower. So it may well be that a medium term investment will allow you the best risk to reward ratio.
A disciplined and well thought through financial plan, will mean that you can have the best of both worlds, a secure financial future where some of your money is giving you that little bit extra.
Author: Ben Barlow