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While most of us are unlikely to ever win an Olympic medal, inheritance, retirement, or selling a home or business mean that it is possible to suddenly come into money and be unsure what to do with it. 

I’ve shared my thoughts on what to consider if you’re thinking about investing.

 

Separate your pots

Receiving a sudden windfall means it can be tempting to splurge it all or lock it up in investments to avoid temptation. But before taking either of these approaches, it’s important to have an emergency savings buffer in place for unexpected expenses, such as needing a new boiler or a car repair. The recommendation is having a pot that could cover between three to six months’ worth of essential expenses.

 

Work out how much you can afford to invest

Look at your outgoings and challenge yourself where you might be able to prioritise saving. Starting today and putting away just a small amount on a regular basis can make a real difference in the long-term.

 

Work out your risk appetite

Think about how you would feel if the value of the money you invested was worth less than when you invested it. All investments carry a degree of risk and it is important you understand this. The value of your investments can go down as well as up and you may get back less than you put in if you sell when values are down.

We seek expertise in all areas of our lives, so financial planning shouldn’t be any different.

Invest efficiently

There are two main ways to invest efficiently – pensions and ISAs. With a pension, make sure you are maximising your contributions and taking advantage of your employer’s matched contributions. With an ISA, you can invest up to £20,000 tax-free.

 

Invest for the long-term

To mitigate risk, it’s recommended that investments are left for at least five years – after all, it’s time in the market, not timing the market. The longer you can leave your investments, the longer you have to ride out any fluctuations in the stock market.

 

Seek expertise

We seek expertise in all areas of our lives, so financial planning shouldn’t be any different. Using your network, asking friends and family and reading up online are all good ways to find financial advice that works for you. Many financial planners offer initial meetings for free, so make sure you take these up to find out about their services and don’t be afraid to ask questions. It’s the job of the financial planner to understand your financial priorities and guide you as the expert.

Some tell-tale signs of a fraudulent investment scheme are promises of large returns over a short period of time. 

Be appropriately suspicious

If an investment opportunity feels too good to be true, then it most likely is. Some tell-tale signs of a fraudulent investment scheme are promises of large returns over a short period of time and being pressurised to rush into a decision. If you end up in this situation, take your time and check if they are registered with the FCA – which any legitimate investment company will be.

 

And finally…will you go for gold

If you’ve been inspired by the athletes bringing home gold, often fund managers can include asset classes, such as gold, as part of your wider portfolio. Like with any asset class, gold is volatile, and the price of investments can go up or down, so investments in this precious metal should form part of a diverse portfolio.

 

Laura Newman is Head of Financial Planning at NatWest Premier. Follow Laura on LinkedIn. 

Investment insights

Read more investment insights here.

The material published on this page is for information purposes only and should not be regarded as providing any specific advice, or used by consumers to make financial decision. Terms and conditions apply to any products or services mentioned.

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