Introduction to investing

Ricky Banham
Financial Planning
Ricky Banham, Lovewell Blake Financial Planning

In March, the Bank of England unveiled its second interest rate cut in under two weeks, as part of a number of measures the central bank and UK government rolled out to help mitigate the economic impact of the Coronavirus.

Ricky Banham, Lovewell Blake Financial Planning

On the 19 March, the central bank’s Monetary Policy Committee unanimously decided to cut the headline interest rate by 0.15%, from 0.25%, to 0.10%. This is great news for those in debt, but not so good, for those with cash savings. 

What does this mean for my savings?

Since the headline interest rate was cut, there has been the expected scramble to remove certain products, or reprice the rates downwards to limit the level of interest paid to consumers. Interest rates staying close to historic lows is a blow for savers who are already struggling with savings accounts paying ever-plummeting rates. Low interest rates could be around for some time, as the UK economy recovers from the aftermath of the coronavirus. Interestingly, however; there are some alternatives to cash based savings, and you might be curious in looking beyond cash, and consider investing some of your money.

Curiosity has been linked to many potential benefits, such as, psychological, emotional, social, and in this case, financial. By learning ways to invest your money now, you could be affording your future self a powerful gift.


Firstly, what can you invest in?

Well, there are a lot of investment opportunities, with the more common investment types being equities (stocks & shares), fixed interest securities, property (bricks and mortar), cash, and the more unusual types, such as coins, comics, and cryptocurrencies. Rather than covering the entire investment universe, let’s focus on the most common assets to invest in.

What are the main asset-classes?

There are four main asset-classes in which to invest, equities, fixed interest securities, property, and cash. Each of these has different characteristics. Exposure to equities (investing in company shares) provides a great opportunity for long-term growth, but at times, can be volatile. Fixed interest securities (loans to companies or governments) generally offer lower returns, but are more predictable and traditionally less volatile than equities. Usually ‘property’ will refer to direct investment in commercial buildings, and as such generally offers more stability than equities, although of course, these investments also carry their own risks. Lastly, ‘cash’ investments offer very low risk, but also very little opportunity for significant long-term growth. 

Investment funds

There are over 3,000 investment funds that either concentrate on a specific asset class, or the more specialist investment funds that offer a one-stop, multi-asset investment solution. Multi-asset investing has grown in popularity over the past few years. A multi-asset approach offers a greater degree of diversification than investing in a single asset class. Many investors look to multi-asset investments to provide a lower-risk solution than, for example, a pure equity fund, where the value can fluctuate significantly. By combining asset classes, and spreading your risk, you can help to improve the stability of your investment.

Investing in multi asset funds means that you are able to take advantage of the skills and resources of expert investment fund managers. These managers focus their time on researching markets and economies, so they can choose the best assets for a clients’ investment portfolio.

What could this mean for you?

By investing in the stock markets, you get access to a wide range of investment opportunities. The diversity is what gives your money the platform to generate potential returns when compared to the interest accrued from a bank/building society. Naturally, investing attracts a greater degree of risk, and this is something that has to be considered carefully before investing, whether you are a cautious, or adventurous investor – understanding the risks are a crucial element of the investment journey.

So, if you have cash on deposit, and are looking to grow your wealth, then investing could be something for you to consider. 

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