If you’re looking to whip your finances into shape in 2017, your first step should be to think carefully about exactly what you’re hoping to achieve. What are your objectives and what sort of timescale are you working to? In this, the first of our four-part guide to becoming financially fit, we look at how establishing exactly what your goals are can help you make better investment decisions.
The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.
Your financial goals are likely to vary depending on what stage of life you’re at.
For example, if you’re in your 20s or 30s, you might want to get onto the property ladder in the next few years, whereas if you’re in your 40s or 50s, your aim may be to cover education costs for your children.
If, however, you’re approaching retirement and you’re in your 60s or 70s, your goal might be to ensure you have sufficient income in place when you stop work.
Whatever your financial goals, you’ll need to decide whether you’re looking for growth from your savings and investments, or an income, or both, to help you achieve them. You’ll also need to ensure that you have some cash savings in reserve in case of any unexpected expenses.
Before choosing where to invest, think carefully about when you want to achieve your goals, how long you can afford to tie your money up for and your approach to risk.
For example, if you’re hoping to achieve your financial objectives in a year or two, a deposit account is likely to be your best bet, as your money will usually be readily accessible.
If you have a medium to long-term goal, which is at least five years away, and you’re comfortable accepting the risk that you might lose money for the chance of bigger potential rewards, then you may decide to invest in non-cash assets such as equities and government and company bonds. Remember though that, just as you may lose money investing, there’s no guarantee that even if you don’t, you’ll get a better return.
Investing over the long-term will mean you’re better positioned to ride out any stock market downturns. However, you’ll need to be prepared to accept the fact that the value of your investments could go down as well as up and you could get back less than you put in.
When choosing investments, aim to build a balanced portfolio, dividing your investment money between different asset classes and geographies. Through diversification, you can attempt to reduce the overall volatility in your portfolio value, as each type of asset will perform differently at various points in time, helping to smooth out the inevitable peaks and troughs of the market.
The Barclays Life Planner tool can help with your financial planning. Based on your goals and circumstances, it projects how your savings or investments could potentially perform in the future. You do need to remember that projections are never a predictor of future performance, and the indicators our tool provides are intended as an aid to your decision-making. They shouldn't be taken as a guarantee.
Find out more about why it’s important to plan
Remember that all investments incur some charges, so it’s important to factor these in before you start buying. You can use our cost calculator to understand more about our fees. This is powered by Compeer Limited, an independent research firm. The costs you’ll see are estimated using assumptions about your typical investment activity.
Once you have clear goals in mind for you and your portfolio, it’s time to put your new fitness regime into action.
Bear in mind that your goals may change over time so don’t be afraid to change your routine if that happens. If you’ve previously invested, take time to review your decisions and look at those which were and weren’t successful. Think about what you can learn from this and whether you might want to cut your losses and sell any long-term under-performers.
It’s also important not to take any investment decision based solely on the past performance of a particular company or fund.
While it might be tempting to invest in a fund or company that has previously performed well for you, there are no guarantees that the same company or fund will go on to deliver impressive returns again. Past performance of investments isn’t a reliable indicator of future returns.
Remember that investments can fall as well as rise, and you may get back less than you put in.
Always remember that investments can fall in value. You may get back less than you invest.
Plan & Invest is a new service which creates and manages a personalised Investment Plan just for you. Whether your long-term goal is home improvements, retirement or just building a nest egg, all you have to do is tell us a bit about yourself and then let our experts select and manage your investments.
To choose and manage your own investments from a range of funds, shares, ETFs and bonds, get started today by simply opening up an Investment (Stocks & Shares) ISA, Investment Account or SIPP Account with Smart Investor.
If you already have an account, log in to continue.
Use our online chat service to discuss your query with a member of our team.
If you have any questions, you can give us a call on 0800 279 36671.
The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.
If you’re new to investing, it’s not always easy to know how to get started. We explain the basics of investing, including how different types of investment work, why it’s important to take a long-term view, and how to begin building an investment portfolio.
An easy way to start investing
Also known as a stocks and shares ISA, an Investment ISA is a tax-efficient2, simple way to invest for your future. Invest up to £20,000 per year and the returns you make from your investments are tax-free.
A fully flexible way to invest
A flexible, straightforward account with no limits on the amount you can invest.