Decision tree: are you ready to invest?

Staci West 01/09/2021 in X Basics, X Millennials

Whether you’re ready to invest depends on a number of factors and not everyone is in the same boat – and that’s okay! Whether you’re currently re-budgeting to get out of debt or simply overwhelmed by the idea of thinking of a 10-year plan, there’s a solution for everyone. Yes, investing can be intimidating, but you’ve got to do it – it’s your ticket to building real wealth and making your money work for you.

“An investment in knowledge pays the best interest” — Ben Franklin

Are you ready to invest?

Think you’re ready to invest? It won’t hurt to double check. Because before you buy anything, quizzing yourself about whether it’s really worth it – aka spending with intention – helps ensure you’re in control of your money. Here are some things to consider…

Learn about strategic bonds

While bonds are deemed to be less risky than equities, it’s important to know that you can still lose money. But they do have the potential for capital growth and usually provide a yield that’s higher than interest on a cash account. Strategic bond funds are the most flexible type of bond fund because they can invest in any type of bond – government, investment grade, high yield and emerging market, as well as other fixed interest investments.

The TwentyFour Dynamic Bond is worth a look with a 4.2% annual yield. GAM Star Credit Opportunities and Jupiter Strategic Bond both have a yield of 3.5%.

Discover all Elite Rated strategic bonds

Consider global equities

If you are willing to take more risk with your money, global equities are a good option for a first-time investment as they have the flexibility to invest in companies anywhere in the world. Funds can vary in the size of company they invest in and even which markets, like the UK, Europe and US.

The Baillie Gifford Global Discovery fund invests in smaller companies from around the world, looking primarily for firms with strong growth potential. Guinness Global Innovators, as the name suggests, looks for companies with innovative and disruption businesses.

Discover all Elite Rated global equities

Research a multi-asset fund

Multi-asset funds can also be popular with first time investors, as smaller sums of money can be spread across different asset classes, giving some helpful diversification without the added research time. Multi-asset funds are categorised by the amount of equities they can invest in, meaning no matter your tolerance for risk, there’s a fund out there for you.

Find out more about the different types of multi-asset funds

Close Managed Income sits on the conservative side of the risk spectrum, as does the VT Momentum Diversified Income fund. The Jupiter Merlin Balanced fund is a fund of funds with a balanced approach to risk, while Rathbone Strategic Growth Portfolio has a big focus on delivering returns with limited volatility and via a risk-controlled framework. Looking for more risk? The TB Wise Multi-Asset Growth fund has the flexibility to invest up to 100% in equities.

Discover all Elite Rated multi-asset funds

Why sometimes the best option is focusing on debt

While it’s important to start investing sooner rather than later – it’s equally as important to do it when it makes financial sense for you to do so.

For example, let’s say you re-budgeted and found £50 a month and want to start investing. But you also have a £2,000 balance on a credit card. The £50 is better served paying off your credit card debt faster.

At 20.77%, the average interest rate on credit cards in the UK, a £2,000 balance would take 24 years and 5 months to pay off if you paid the minimum payment each month*. Ouch! If instead you paid £50 + the minimum payment, you’d have paid off the card in 2 years and saved £2,553 in interest*. To get that same level of returns over 2 years on a £50 a month investment you’d need to return over 70% a year! Not likely.

In this case, it makes sense to focus on your debt and then, in 2 years’ time, invest the full £101 a month. And why not take the time you’re focusing on debt repayments to learn more about money and investing so when you’re ready to open that first ISA account, you know exactly where to start.

P.S. £101 invested monthly for 2 years with 5% annual returns would give you £2,543**

*Source: Barclaycard repayment calculator
**Source: This is Money savings calculator

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.