Before you decide to invest your money, you need to condider the amount of risk you are willing to take, and the way in which you wish to receive any returns you make. If you cannot afford to lose any of your capital, or if you are not prepared to invest your capital for a long period of time, investment may not be the best option for you because of the risk involved.
It is important that you remember the stricter terms and conditions associated with investment accounts: it is not usually possible for you to access your money at short notice, there is no guarantee of returns and no guarantee that you will not lose some or all of your money. If you do not have a lot of savings, or if you are older and concerned about losing money you will not be able to replace, you may wish to avoid the risk associated with an investment account. You can reduce the risk involved by investing a smaller sum of money for a longer period of time in an investment portfolio which does not buy into high-risk products.
If you have considered the potential risks involved and are still interested in investment, you should discuss your options carefully with a financial advisor. Only when you know the exact terms of your account and the risk involved can you make an informed decision that will prove best for your long-term finances.
As well as considering the risk involved, it is important to decide how you would like to receive your investment returns, should you make any. Usually you will be able to choose between two return options: an income or a growth in capital. If you wish to earn a regular income from your investment, your capital will usually be invested in funds which stand the best chance of earning good returns. These returns will be paid to you on a regular basis: often once a month or once a year, and provide you with an investment 'income'. This income is not usually guaranteed but will depend on the returns that your capital makes, for example, you may be entitled to an income equivalent to ten percent of any returns earned. The rest of your returns will be added to your capital, increasing the amount that is invested and improving the chances of impressive returns.
Alternatively, non-income investments reinvest returns that your capital earns so that the value of your capital grows over time. When the investment period is over, your original capital should have increased; there is usually a good chance of non-income investments growing better than income investments because all returns are re-invested, and as the capital increases so does the potential for good long-term returns.
For further information on long-term savings options see:
