When choosing investments, your first step should be to work out your attitude to risk.
There are three common types of investor – those with a medium-low appetite for risk, those who take a moderate approach and those prepared to accept a medium-high level of risk. If you’re not sure where you sit on the risk scale, it’s important to spend some time getting to know your approach to risk.
Find out more about managing risk and investing efficiently
Understanding your approach to risk can help you work out the best way to divide your investment money between various asset classes such as cash, bonds, property and shares.
For example, if you’re risk-averse, you may decide to hold all, or a larger proportion of your portfolio in cash, or fixed interest investments, such as gilts and corporate bonds. If, however, you’re comfortable accepting a much higher level of risk of loss, you may be prepared to venture into more speculative investments, such as smaller companies or emerging markets.
The importance of diversification
Whatever your approach to risk, it’s important to try to build a portfolio that isn’t top heavy in one particular area. Try to spread your investments across a range of different assets, sectors and geographical areas. At any one time, some of your investments are likely to perform better than others – some might gain, while others may lose. The hope is that with a diversified portfolio, the performance of the strongest investments could offset the performance of the weakest, leading to more consistent overall returns.
One way of spreading risk is to invest in pooled funds, such as open-ended investment companies (OEICs) and investment trusts. These are managed by professional fund managers who invest in a wide range of different companies on your behalf. This can help to reduce your exposure to failures or setbacks in any one company or area. If you’re unsure about which investments to choose, seek independent advice.
Do plenty of research
When you exercise, you need to do plenty of warming up to make sure you don’t do yourself any damage. It’s the same with investing – if you dive in without doing any preparation, the risks of coming unstuck later are much greater.
You should always do lots of research before you invest and think carefully about the risks involved in any investments you’re considering.
The good news is there are plenty of resources available to help:
Weekly Investment Spotlight
Keep up to speed with the latest developments in equity markets through our Weekly Investment Spotlight, which provides topical insights from Barclays’ investment experts and highlights key themes and areas of interest.
Read the latest News and research
Investment ideas and strategies
Informed decision-making and accurate analysis are keys to investment success. With the latest trends and research from our own professionals and independent industry experts, you should find what you need to be a better investor right here.
Read our latest investment ideas and strategies
Make sure you understand the risks of our investment products before you start trading. The value of investments can fall as well as rise and you might get back less than you invest. Barclays Smart Investor doesn’t provide advice, so if you’re unsure seek independent advice.
In case you missed it, you can see step 1: Set your goals.