The reality of investing today

Richard Ince
Financial Planning
Richard Ince, Lovewell Blake Financial Planning

We have seen some turbulent markets in the last 12 months, with the repercussions of COVID having a significant impact. Generally speaking, markets have partially recovered but remain extremely volatile.

Richard Ince, Lovewell Blake Financial Planning

At times, investing can seem too confusing, too risky, or just 'not for me'. Like everything, the more you know about it, the better informed your decisions are.

Why should I invest?

Investment risk is (for example) putting money into an investment linked to the stock market where there is the potential for the value of the investment to fall below the initial investment amount. The reason people choose to invest is the potential for greater returns over the longer-term.

With investing, the value can go down, as well as up, so you may not get back the amount you put in. There is no need to think about any of this on your own - help is always available and at Lovewell Blake Financial Planning Limited, we can talk to you about the risks involved with investing in more detail.

There are many articles written, which call themselves 'investing for beginners’ but perhaps a better place to start is to simply understand the 'point' of investing. Why could it be a good idea? Why should you consider it?

It is always best to have some money readily available in the bank in case of emergencies, but investing gives you the opportunity to make your other money potentially grow and work harder for you.

What if I am not comfortable losing money?

If you are already thinking about the word 'lose', and thinking that you are not comfortable in losing any money – it is worth considering that if you have excess money in savings, there is a chance that you are already losing money because of inflation. Put simply, inflation is the rising cost of goods you buy. If inflation is increasing, it means you can buy less with your money. 

Source: ‘Investing for beginners’.

In the graph shown, we have used a rate of inflation of 2.5% each year. This means that the purchasing power of £10,000 today, could be worth just £5,394 in 25 years. The actual rate of inflation could be higher or lower.

Of course, inflation affects all types of investments, not just the money you hold in your bank account. You may want to consider an investment that has the potential to keep pace with inflation; however, that will come with a risk to your capital, so you need to be sure it is right for you.

So, what do you need to know if you are considering investing?

First things first - not all investments are the same, some are higher risk, and some are lower risk.

You will need to think about what type of risks you can take, and what you could afford to potentially lose when investing.

How can we help you?

If you would like to talk about this further, we can look at your individual requirements, discuss the level of risk you are comfortable taking, and balance that with the level of rewards you are aiming for. Then, we will recommend the options that are suitable for you. This is one of the main reasons people use the services provided by Lovewell Blake Financial Planning Limited, to take advantage of the expertise available.

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