Savings & Investments | LR

A response we often hear when asking “Have you got any savings in place”? is After I have paid out for everything, I have nothing to save “.

We should save because we can’t predict the future, saving money will help you to become financially secure and provide you with the safety net you will need, in case of an emergency”.

If we take a moment to look at why saving money for the future is one of the great habits of wealthy people, we will find that the rich are getting richer because of the way they look at spending and saving money. They have the successful habit of being able to controlling their expenses in order to grow their wealth. If you want to achieve your financial goals the most important step is to get control of your spending habits and make sure you are taking the first big step, which is to save.

Instead of spending throughout the month and savings what is left, try putting some money away first and then spending what is left. This small change could make a big difference.

The first thing to do when talking about savings and investments is to understand what is actually meant by Savings and Investments. This can be broken down into two topics titled “No or low risk Savings” and “Risk Based Investments”.

If you’re a cautious person you may find that investing your money is a scary thought and you don’t like the idea of taking a risk, you will be looking at:

“No or low risk Savings” – No risk to your capital, what you save you get back with some interest. The low risk is inflation, if inflation is higher than the interest paid, then, in real terms, the value of your money is going down.

Examples of Savings Accounts are bank or building society deposit accounts, a Cash ISA and National Savings Premium Bonds.

These types of accounts are suitable emergency funds and for short to medium term savings.

“Risk-based Investments” – They are normally held for a minimum period of 5 years and carry a risk that the capital can go down as well up in value. The areas or “asset classes” are wide and varied and carry different levels of risk.

Examples of risk-based Investments are Stock & Shares ISA, Pension Plans, Unit Trusts and Investment Bonds. This is where many people join together and invest in funds run by a fund manager, who intern invests in to various “asset classes”.

These types of investments are suitable for 5 years plus and long-term goals such as Retirement.

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FAQs

Is it a risk to pick your own stocks?

Yes, it can be if you don’t understand what you are doing, you could be putting your money into an investment that doesn’t match up to your risk level. Meaning you could be finding yourself taking more or less risk then you wanted.

I keep hearing it’s crucial to be diversified. Why?

Here at LR we believe the old adage, “Don’t keep all your eggs in one basket” that’s why we diversify your investments. By using more than one area for your investment.

How often should I check my portfolio?

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You should review your investments when you want, but as a rule of thumb, we would recommend that a review is undertaken once a year.

Can I plan for more than just my retirement?

Yes, having a plan for your saving and investments is the first thing you should decide. Start with an emergency fund, then short and medium-term savings and then investments.

How easy is it to start investing?

Starting to invest is easy but the process is not simple if you have not invested before. You should take advice from a registered financial adviser who will help you to understand the process.

I don’t have a lot of money, is investing only for the rich?

No, investing is not only for the rich, it is for anyone who understands that investing is for the longer term and that the value of investments can down as well as up.

How much money can I invest at once?

You can invest everything you have saved, but would the be sensible, No. Speak to one of our financial advisers who will help you to determine a amount which affordable.

Will I be paying tax on my investments?

Depending on your personal situation and the product you invest in, there may be no tax liability due on your investment. Speak to one of our financial advisers for a personal review of your finances.

Will having investments effect my tax bracket?

Again, this will be determined by your personal circumstances and the type of investments you hold.

How should I divide up my money into savings and investments?

We would always recommend that you have an emergency fund, short and medium-term savings and investments for the longer term.

Could I have joint investments with my spouse?

Yes, many investments allow joint investment to be held and, in many cases, it is sensible to do so.

Can I gift my investments to another person without cashing in the investment in?

You can assign your investment to another person, but they would then have control of the investment, or if wish to gift your investment and not give them control, a trust could be used.

Would I have to pay tax on my gifted investment?

Inheritance tax may be due within the first 7 years of the gift be made or longer if a gift has been made previously. Income or capital gains tax may be due on assignment.

What can I do if I feel my investments, are starting to get to risky for my liking?

By regularly reviewing your investments, with your financial adviser, you can change the areas and funds in which you are investing and reduce the risk you are taking within your investments.

Can I ensure my investments in case the market crashes?

It is possible, with certain types of investments, to have some protection, but these investments are complicated and are not for the majority of investors. If this is something that you want to know more about, please discuss it with your financial adviser.

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