Preparing to invest

Are you ready to invest transcript.

Hello and welcome to the second video in the Legal & General Investments master class series.

In this episode, we ask the question, ‘Are you ready to invest?’

It is clear that different people have different objectives in life, and before you consider dipping a toe in the investment pool, it is important to choose the savings or investments that suit your goals and time of life.

It is especially important to ask yourself a number of key questions before you start to enter the investment world. A checklist, if you like, that helps you work out if you are ready to take the investment adventure.

Now, before you make any kind of decision on what to invest in, it’s important that you know exactly how much money you can comfortably afford to invest. Because while investing prudently over the long haul can potentially help you create real wealth that beats inflation and helps you fulfil your goals and ambitions, it is still important that you keep one eye on the here and now.

Can you say yes to the following statements?

I’m free of debt (other than my mortgage). Debt is expensive and is likely to cost more than you could earn by investing. Consider paying it off first.

I’ve enough life insurance cover should something terrible happen to me to future-proof the well-being of my dependents. Think of this as the best investment of all.

I’ve built up an emergency fund. Three months’ salary in an accessible savings account is good, six months is even better You might also think about protecting your income in case you become ill or injured.

I’ve  thought about pension provision.

If you feel that you have these ‘basics’ covered then start thinking about investing.

Everyone has a different set of investment goals they aspire to. So before you begin investing, it is important that you work out how long you’re willing to keep your money tied up for.

As we saw in episode one, to get the best returns out of investing in the stock market you might want to keep your money invested for the medium to long term. Many good investment products can give you access to your money quickly should you need it – but if market conditions are gloomy it might be exactly the wrong time to withdraw.

There is always a risk in anything you do in life and it’s no different when dealing with investments.

Risk can mean different things to different people, so before your investment adventure begins, ask yourself ‘What level of risk am I willing to take’? While higher risk investments offer the higher potential returns, don’t forget you could also make a significant loss if the value of the market falls.

Different people have different risk tolerances. Some people enjoy taking risks while others don’t. It’s important you work out how much risk you and your money are comfortable to take on.

The good news is that investment opportunities come in different risk categories – some high, some low. There should be one that suits your attitude to risk.

Another consideration before investing is whether you’d like an income from your investment or whether you’d want it to grow over time.

Some investments aim to deliver growth over time – great if you are investing to meet long-term goals. It’s also a good idea to review your investments often to ensure they still meet your investment objectives.

On the other hand, if you're counting on cash from your investments to pay part of your living expenses, you may be more likely to make income investments.

It is also possible to create an investment portfolio that gives you a combination of growth and income. Don’t forget, growth can be generated through investing your income.

Before we end the video, let’s quickly recap the four main questions you should ask yourself to ensure you are ready to invest.

Question one: How much spare cash do I have to invest?

Question two: How long am I willing to keep my money tied up for?

Question three: What is my attitude to risk? Am I someone ready to take bigger risks for potentially bigger returns? Or am I someone who is looking for  lower risk investments?

Question four, and finally: What do I want from my money? Am I investing for growth or income, or perhaps both?

Thank you for watching this Legal & General Investments master class video.

In the next episode we will begin to look at ‘What can you invest in?’

In the meantime, if you’d like to take a look at our range of stocks and shares ISAs, please visit our website.

All investments carry an element of risk. Please bear in mind:

• The value of your investment may fall as well as rise and you might not get back your original investment.
• If you choose an investment fund which invests overseas, changes in exchange rates between currencies may cause the value of your investment and the level of income to fall as well as rise.
• The tax efficiency of ISAs is based on current rules. The current tax situation may not be maintained and the value of the tax treatment depends on individual circumstances.
• These investments are medium to long term, ideally five years or more

Find out more about Legal & General investments.