Saving is a way of putting money aside for the future. It is not a way of making substantial income, but a safer solution to short term needs. Savings are useful for building up a deposit for a property or paying for one-off events.
Investing typically means a longer-term commitment on the anticipation of growing more than through savings. Investments are better suited to those who don’t require easy access to their money and are prepared to take on some risk. With many investments, there is a risk that you might not get back what you invested in the first place. Risk includes occasional and inevitable downturns in the market. However, over the long-term (five years or more) those dips have historically smoothed out into an overall upward growth pattern.
Do you have any current investments?
Are your investments paying for your daily living expenses?
Would you need the money you have invested to cover expenses in an emergency?
Do you have any major financial commitments that could mean you need to access this money earlier than you think?
How long can you leave your money invested? Investments are generally held for the medium (at least 5 years) to long term (over 10 years)
The greater return you want on your investments, the more risk you’ll usually have to accept. This is why its important to know your attitude to risk.
Learn more with our quick quiz.
1. When faced with a major financial decision, are you more concerned with possible losses or the possible gains?
A. Always the possible losses
B. Usually the possible losses
C. Usually the possible gains
3. What do your other savings and investments look like?
A. I have some cash in the bank
B. I have some cash, plus a few assets and investments
C. I have a large and diverse portfolio
2. Have you ever borrowed money to make an investment (other than for your home?)
A/B. No
C. Yes
4. Investments can go up and down in value and experts often say you should be prepared to weather a downturn. By how much could the total value of all your investments go down before you would feel uncomfortable.
A. Any fall in value would make me feel uncomfortable
B. 10%
C. More than 50%
Want your money to work harder? Find out more with our investment guide
Low attitude to risk
You are likely to prefer deposit accounts and cash to investments in the stock market
(Equity investments are not as secure as deposit accounts)
Medium attitude to risk
You are likely to want to take advantage of investments with good long term returns, like medium risk Managed Funds.
High attitude to risk
You are more willing to accept loss to gain potentially higher returns. You are more likely to use specialist investments and investment funds.
That was a very quick analysis of your attitude to risk – and it is just an indication.
But we hope it has helped you to understand how our fact find process works, and how we discuss client’s circumstances and their values.
If you’re interested in finding out more about your attitude to risk, you should always speak to a financial adviser.
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Shares are units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends. The two main types of shares are common shares and preferred shares. Physical paper stock certificates have been replaced with electronic recording of stock shares, just as mutual fund shares are recorded electronically.
Cash is legal tender or coins that can be used to exchange goods, debt or services. Sometimes it also includes the value of assets that can be converted into cash immediately, as reported by a company.
Anything over which a person or business has legal title. Property may be tangible or intangible, but it is owned by an entity and is therefore considered an asset or a liability attributable to that entity.
A debt instrument such as a bond, debenture or gilt-edged bond that investors use to loan money to a company in exchange for interest payments. A fixed-interest security pays a specified rate of interest that does not change over the life of the instrument. The face value is returned when the security matures.