Which funds are right for you?

In an expensive world, you need the right tools to build a robust savings and investment strategy. But what kind of investor are you and which funds are most suited to your needs?

You’ve opened an offshore account to manage your money while overseas but how are you going to grow your savings? Whether you’re planning to send the kids to university or you see yourself on the deck of your own yacht in a few years’ time, you’ll need to increase your wealth to meet future costs. A key way to meet the financial challenges that you face is to develop an investment strategy that suits your needs and attitude to risk. You have to be realistic about what you can afford to invest, how long you can invest for, what level of risk you are prepared to accept and how it will affect your potential returns.

Secure Investments

These are a safe option and ensure that the money you put in, you receive back at the end of the term.  Secure investments are normally cash based giving a return paid in interest.  This can be quite small in the medium to long term but is reflected in the often instant accessibility of this type of account.

Instant access to money is often an important consideration for some savers.  Returns may be modest and for this reason the purchasing power of your money could be significantly affected by inflation.

The Cautious Investor

You should consider yourself cautious if you want to take minimal risk with your capital. This will probably rule out ploughing a large lump sum into stock market related investments. However, when you consider that, for example, You and Your Wedding magazine recently put the average cost of a wedding at £20,000 in the UK, it is still important to look for growth to meet such expenses.  So where can you put your money that will give you reasonable returns but also protect your capital? The most obvious answer is a savings account and there is a range available with features to suit most savers. For example, some fix your interest rate for the duration of the deposit or others link to the money markets to increase the potential return.

Of the banks that offer international savings products, the majority will also provide services which give you access to the equity markets over a fixed period and offer 100 per cent capital protection at maturity. You might also consider a money fund, which simply pools its investors’ money and places it on deposit with trusted banks at a higher rate than you could achieve yourself. Alternatively, there are also services available which maximise income while protecting capital by investing in high-quality banks and building society deposits. 

The purchasing power of your money could be significantly affected by inflation.

Striking a balance

Taking a balanced approach to investment over the medium to long term allows you to spread your exposure to risk by investing across different types of assets in a range of markets. This can be an excellent way of saving for retirement over the long term or for expenses that you know may come up in the future. If you have children, for example, it makes sense to start planning ahead given the rising cost of further education. For many people, the simplest strategy is to invest in funds that are based on a balanced approach.  A good bank with internationally designed savings products will offer a range of such products. 

Progressive Investors

Despite recent falls, the equity markets have delivered strong growth over the long term and the FTSE 100, for example, has grown considerably since its launch in 1986. A progressive investor may turn to the mature markets in Europe, the UK and the US rather than the traditionally more volatile emerging markets. With the average cost of retirement potentially rising to £700,000 by 2018, according to a report from the Life Trust Foundation, investing in shares over the long term can help you enjoy growth that is not possible with most other investments.

Adventurous Investors

Although not for the faint-hearted, investing in emerging markets such as the Far East may deliver excellent returns. If it’s a luxury lifestyle or a yacht you want to pay for, this might be the way forward. However, you must understand the higher risk profile of these markets, which have not previously been as stable as the more mature regions. Although many of the emerging market funds available offer the potential for excellent gains, it’s advisable that you speak to an expert before you invest.   

Specialist Investments

Investment in UK or International specialist  funds or schemes often carry a very high risk of capital loss.  These investments tend to be very volatile and can put investors’ entire capital at risk.  These investments are often required to take a longer term view to reap benefits.

You should remember that when investing in funds, that the value of shares and the income from them can go down as well as up and cannot be guaranteed.  Consequently, on selling you may not get back the amount you originally invested.