What are my options?
There is an exhaustive list of potential future expenses that you might need to save or invest to meet. Weddings, house deposits, school fees, new cars, university tuition, house repairs or that big holiday – they all come at a cost.
If you know the cost now, and can meet the cost through surplus income or capital between now and when the expense is due, you are more than likely going to be best saving rather than investing as you have more to lose that you have to gain.
If the expense is more than five years in the future you might think about investing to ensure that you retain your buying power if the cost of your expense increases with inflation.
I can only invest a set amount due to my personal budget
If you do need to invest to meet you expenditure needs you will need to think about which wrapper is most suitable. Most providers now allow access to capital without charge, although depending on the provider there may be a small investment fee to sell the investment themselves and allow cash to be paid back across to you.
What is the best product (wrapper)?
Some wrappers, such as an ISA, allow the capital gains you make to always be paid back to your free from any tax but other wrappers, such as an investment bond or a general investment account might have tax implications.
This will depend on your rate of income tax and the amount that you have earned. If you have invested large amounts and made high gains it cane advantageous to spread the withdrawal over a number of years so planning for getting the money out of the investment can be just as important as planning for getting it in and this will need to be considered at outset so things are set up in the best way overall, not just in the way that looks best at the start.
I’m ready to invest, what do I do next?
Once you have decided to invest and which wrapper you are going to use you might want to consider spreading your risk by phasing the investment. This means investing your capital over a number of months to ensure that you don’t put all of your money into the merle at a short term peak.
Once the money is invested you can always look back and with hindsight you might be better or worse off for spreading the investment. However, phasing is usually a good idea because of you are worse off in the it tends to be only marginally whereas if you enter the market in one go there is a risk that you can be significantly worse off.
For both a phased and non-phased investment any losses you encounter in the short term should be regained over time.
Even in the worst of scenarios time is the greatest healer of asset prices and, as long as your investment selection suits your timescale and attitude to risk, invested capital has always come good in time.