|IN BRIEF: Investments are an important part of your overall financial plan, but if you are unsure as to what to invest in, it is a good idea to meet with a financial planner and get professional advice before rushing in to anything. |
Investments are an important part of your overall financial plan and financial services companies offer a wide and often confusing array of products. It's always a good idea to talk to your financial adviser about where to invest your money to meet your unique goals.
There are a number of things to consider before deciding where to put your money. Remember, this is your hard-earned money and it's worth the effort to do your research (and we're not talking about a tip from your uncle) before taking the plunge. This is true for both the financial services company (or investment house) and for the investment product you select.
Lets look at the most important considerations:
- How much money do you have to invest? Some products require you to invest a greater amount of money than others. Choose the right investment according to the amount you have available, bearing in mind that the more you invest, the more interest you could earn.
- How accessible do you want your money to be? Different products offer different degrees of access to your funds. Some may not allow you to withdraw any money for the full investment term, while others will restrict you to a certain number of withdrawals of a certain amount. Before selecting an investment, be sure to carefully consider the possibility that you may need to access some of your money before the investment term is over.
- How long do you wish to invest for? The longer the investment period, the more interest you could earn. So, if you want to use the money in a year for the deposit on a house, then try and invest for the longest investment term possible, even if it means delaying your purchase for a few months.
- Do you want to grow your capital or have it earn you extra income? If you want to grow your investment, you should leave your capital and the interest you earn in the account for the full term. This means that you don't get any sort of income from your investment, but you do earn interest on the interest and get a larger lump sum out at the end. If you require a regular income, you might have the interest you earn paid into another account. In this way, while you will not grow the amount you have invested, you receive extra income from it.
- What type of interest rate do you want? The interest you earn can be influenced by various factors. Some interest rates may be pegged to the money markets, while others are fixed for the entire investment period or change at the bank's discretion.
Unless you're quite confident to deal with long-term money matters, speak to a financial advisor about your investment options. You can do your own research, start thinking about what you'd like to achieve and possibly prepare some questions to ask your advisor, but going through a professional can end up saving (or making) you a lot of money.