Who Should Invest Your Money? Choose the Right Investment Setup

Despite what most people think, investing isn’t something reserved solely for the wealthy. Anyone can, and should in fact invest. Whilst it can take time to grow in confidence, the best thing to do is to get started. Even investing small amounts can make a big difference.

Time and time again research has shown that investments in the stock market outperform money sitting in cash savings over the long term. And with interest rates lower than inflation those with the majority of their money in cash could actually be losing money in the long term.

You don’t have to be rolling in money to invest in the market – anyone who wishes to make their money go further can invest, nor does investing have to take up a lot of your time. The best guidance is to start now as investing a small sum of money regularly can add up and go a long way. The reality is, investment is for everyone and you do not have to break the bank to invest.

For those considering investing, one should be aware of the three main ways in which you can go about investing your capital.

You can, for example, choose to do it yourself, and you can receive advice from the bank or you can leave it fully to the bank to take care of your investments for you.

Deciding on the best approach to take in order to invest your money is by no means a big decision, and as always, there are both benefits and challenges that come with the different routes you can go down in order to invest your cash.

Getting started – Determine what you are investing for

Before you start investing it is important to think about what you are hoping to achieve. Are you looking to build up your retirement savings, or are you saving for that dream vacation in the south of France? What you are investing for may impact the product you choose to invest in.

Manage your risk

Risk and returns go hand in hand. When investing in the stock market, there are no guarantees that your money will increase. The market can go up as well as down in value, so understand your tolerance for risk. Remember that investing is for the long term, so don’t invest any money that you will need in the next few years. Always make sure that you have enough in your cash savings for emergencies.

There are ways to mitigate your risk when investing. For example, diversifying your portfolio of investments across markets and asset classes can help protect your investments from any dips in the market.

Take it in to your own hands and invest the money yourself

Many investors are tempted by the opportunity to invest their money themselves, and it also has its advantages. First of all, you are solely responsible for your own successes, and it can be a great feeling when things go your way.

In addition, it is basically the cheapest way you can invest your money. It is important, however, that you not only go for a cheap brokerage, which is the trading costs that are involved in a transaction, but that you’re also aware of eg. currency cutting.

For those of you new to the term, currency cutting is a method the banks use to make more money by taking a higher payment for a share in a foreign currency than it is actually worth in your currency.

But even if it is a bold feeling and also a cheap way, to invest your money yourself, it also has its challenges.

How do you for example get an overall strategy for you investments? How do you know what your risk is? How do you know if you are good at investing, or could it be that you have just been lucky?

And what if the crisis suddenly hits? Then what do you do?

Investing, like any other industry, requires education, knowledge and the right amount of experience. It can therefore be a good idea to get help from a third party, which brings us to the next investment setup you can choose.

Let your bank advise you on how to invest your money

Perhaps not surprisingly, the vast majority choose this solution. By doing so, investors will still very much manage their investments themselves, make all major decisions but get the advice needed from a third party, which is the bank.

Although this solution seems appealing to many, it does in fact present a great amount of challenges.

Firstly, there can be a long way from idea to action, as the process can be long and tiring; from your adviser getting an investment idea until you have approved it and put it in to practice.

In addition, it can be difficult to know whether you can in fact trust your counselor – how do you know if he or she sincerely came up with a great advice, or if they are just trying to sell you something? Add to that the challenge of assessing and having an overview of how it all goes with your investments, and then you have the recipe for an investment solution that is not optimal.

Let the bank invest your money for you

Professionally, this solution is the ultimate and the benefits are plenty. You get a better return, you’ll spend less time on the process as you’ll get others to do the job for you. These professionals are the best at what they are doing so can be sure to sleep safe and sound at night all whilst getting a focus on risk management.

There are generally two groups that choose this setup – professionals, being well-experienced investors, and then those who don’t know anything about investment.

And there is one thing that sets them apart:

The professionals have a wide range of selection criteria they use to find the right manager – and that is the key to their success.

Having the right selection criteria when choosing a manager is crucial for assessing which agreement to enter and whether one’s results are good or bad. But do not fret! There are companies our there that can help you with just this. For example, Proveo is a company which offers an impartial service for businesses and investors who are looking for the best possible management for their assets, understands the importance of this manager-client-relationship, and this is at the very core of what they offer.

After years working in investment banking, handling some of the world’s biggest investors, their founder Johann Laux noticed a gap in the market for an impartial company that put its clients’ needs at the heart of the business. He believes that continually assessing their managers’ performance is key to delivering the best service to those looking to make the most out of their investments.

Ongoing assessment is crucial

For most, the ultimate investment setup will be to let the bank do the hard work. However, you cannot completely sit back and relax – it is crucial that you regularly evaluate which alternatives are available to you so that you can always make sure that you have exactly the investment framework that is optimal for you.

Manage your risk

Risk and returns go hand in hand. When investing in the stock market, there are no guarantees that your money will increase. The market can go up as well as down in value, so understand your tolerance for risk. Remember that investing is for the long term, so don’t invest any money that you will need in the next few years. Always make sure that you have enough in your cash savings for emergencies. There are ways to mitigate your risk when investing. For example, diversifying your portfolio of investments across markets and asset classes can help protect your investments from any dips in the market.

Put your money where your mouth is

There is no specific amount that you should invest. For beginners it’s probably smart to start small and build up to investing more money in the long run as your confident and knowledge grows.

Harness the power of pound-cost averaging to make the most of your investments. It is far better to ‘drip feed’ small amounts of money on a regular basis, for example every month, over a long period of time rather than investing a large sum of money once. This is because you will buy fewer shares when the market is rising but will be able to buy more at cheaper prices if you catch it while it is falling, averaging out the overall cost and risk.

Stay in for the long term

Do not panic! Shares can go up and down, so you should resist temptation and not buy or sell just because everybody else is. Remember, you are not a trader! Long-term investing should be boring. You pick a few shares or funds, you keep an eye on them and make small adjustments occasionally, where appropriate – that’s all.

Choose the right vehicle for you

There are many different products that you can invest in, and what you choose is likely to be based on your risk appetite, how much you can invest and what you are investing for. For example, if you still want the flexibility to be able to access your money when you need then an Isa might be the best choice, or if you’re wanting to lock in your money to save for retirement a SIPP might be suit your needs better.

Sophia Anderson

Sophia Anderson is a blogger and a freelance writer. She is passionate about covering topics on money, business, careers, self-improvement, motivation and others. She believes in the driving force of positive attitude and constant development.

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