5 Questions to Ask Yourself Before You Invest

By Kate Howells, Wealth Manager at BRI Wealth Management

Thinking about getting into investing? We have highlighted some key information from the Financial Conduct Authority’s (FCA) recent #InvestSmart campaign that aims to equip people with the best possible knowledge to make smart decisions regarding their current and future finances, and ultimately embark on their investing journey with confidence. So, let’s get started!

Should you invest?

It may seem that the ‘investing trends’ has gained more popularity in recent years given the increasing array of choice and new technology introduced to support more on-demand and easy investing.

But does that mean it’s the right choice for you?

The FCA has highlighted 4 crucial steps to have in place before considering investing.

1. Are your immediate finances in order?
2. Have you paid off any existing short-term debt?
3. Do you have any existing savings or emergency cash funds?
4. Have you considered investing more into your workplace pension?

If you answered yes to all of the above, then you may be in an ideal situation to consider commencing your investments journey. For more detailed information on why the above 4 questions are important, visit Should you invest? | FCA

5 questions to ask before you invest

So, your finances are in order, and you are ready to take the first step. These next 5 questions will help you determine your best route into investing and shed light on what to expect along the way.

1. Am I comfortable with the level of risk? Can I afford to lose money?

Many people who are keen to invest often fall into two traps – Guaranteed returns and quick returns.

Neither of which are entirely true. A golden rule of investing is you need to be in it for the long haul.

“If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes” – Warren Buffet

2. Do I understand the investment, and could I get my money out easily?

What is it? How does it work? Who is behind it? And how easy is it to get your money out if you need to? These are all important things to consider before you invest.

3. Are my investments regulated?

The FCA’s aim is to ensure firms engaging in regulated business treat customers fairly. Activities not regulated by the FCA will not benefit from access to the Financial Services Compensation Scheme (FSCS) or Financial Ombudsman Service (FOS) if things go wrong.

4. Am I protected if the investment provider or my adviser goes out of business?

Before committing to a provider or adviser it is well worth doing your homework, what if any protections are offered if that business of person goes under? What is the current reputation and stability of the company or person you choose?

To help make this decision easier, the FCA has a Financial Services Register with a list of all those who are authorised in the UK.

5. Should I get financial advice?

It goes without saying that seeking professional advice on financial matters such as investments is extremely beneficial. Advisers can advise on, execute and align your investments in accordance with your personal goals.

At BRI our wealth managers are highly qualified and knowledgeable, with many years portfolio management experience. We offer investors flexibility to decide whether they want us to manage their portfolio on a discretionary, advisory, or execution only basis. To speak with an adviser today to discuss your options, please call us on 01676 523 550 or email enquiries@brigroup.co.uk.

For more information from the FCA on steps to take before deciding to invest, click 5 questions to ask before you invest | FCA

Risk and returns

You will most likely have noticed the ‘Capital at risk’ disclaimers on all investment advertisements, this is because unfortunately, there are no solid guarantees. By choosing to invest your money, you are agreeing to accept varying degrees of risk depending on your specific criteria.

Following a discussion and assessment with an adviser, you will be assigned to a certain ‘risk category or profile’. This will be chosen based on your desired timeframe, attitude towards loss and financial goals. Your risk profile will affect which funds you choose or are advised to invest in, and subsequently will determine the level of returns you could achieve.

Risk and returns are explained more thoroughly in the following links:

Risk and returns | FCA

Understanding high-risk investments

Diversification

Now that you understand the risk element involved with investing, it’s well worth learning about the ways you can aim to minimise potential losses.

In a nutshell, diversification is the art of not putting all your eggs in one basket. The FCA explains that spreading your investments across different products or funds means you are less likely to be solely dependent on any one to perform.

To learn more about diversification and the benefits, including some examples visit the FCA site here Diversification | FCA.

To summarise, when it comes to investing ‘risk comes from not knowing what you are doing’ – Warren Buffet, so we hope that this article, as well as the resources on the FCA website have helped you to further understand the subject, so that ultimately you can #InvestSmart.