- 22nd Oct 2015
Investing a lump sum – what you need to consider
Investing a lump sum can seem a daunting task at first – especially if you’re not used to dealing with investments, or finances in general. You can quite easily end up being surrounded by a multitude of acronyms and opinions. And for all of the information you read, you’re still none the wiser.
Making sure you address a few important points initially can go a long way towards making the process of investing a much more straightforward and hassle-free one. Below are a few considerations that aim to help you answer not only the question of whether or not you should be investing your money but also how to invest it once you’ve made the decision.
5 things to think about
Address any debt
As a rule of thumb, clearing any debt should always be the first priority before investing any money. Whether it’s a credit card, a personal loan or something else, debt can carry a number of forms. But in most cases they will have the common characteristic of charging you interest. Along with the clear financial benefit of paying off a debt, there is certainly an emotional benefit too. A debt gone is a weight lifted.
Establish an emergency fund
Everyone’s circumstances are different, so the amount required will vary, but establishing an ‘emergency fund’ is an important step to take before investing. As a rule of thumb, at least 3 months’ income should be held in cash; ready at short notice to cover any unexpected expenditures.
Decide on your involvement
When choosing to invest money there are a number of different levels of involvement you can opt for. From deciding on, and instructing, every investment decision yourself to leaving it entirely in the hands of a professional. And there are services in between these two extremes as well. The level of involvement you elect for will likely depend on a few things; namely your knowledge and understanding of investing, and how much spare time you have.
If you elect to ‘go it alone’ when it comes to investing, you’ll need to firstly decide on the actual investments that are to make up your portfolio and the level of risk you wish to take. If you elect for financial advice (be that online or face to face), this will all be done for you.
When it comes to the performance and growth of your investments, cost is an important factor – and a factor that you have definite control over! So while you won’t know exactly how the stock market will perform going forwards, you do know how much you’ll be charged. Ensure you’re aware of all the charges you’ll incur (it’s not always made easy) and ensure its good value for money. Like anything in life, it can pay to shop around.
At Wealth Horizon, we provide financial advice alongside a low cost and fully managed online investment service. Our fees are clear and our service straight forward.
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Any news and/or views expressed within this article are intended as general information only and should not be viewed as a form of personal recommendation. This article is not directed to, or intended for distribution or use in, any jurisdiction where such distribution would be prohibited. To the extent permitted by law, Wealth Horizon accepts no duty of care or liability for loss occasioned to any person acting or refraining from acting as a result of any material contained within this article. Where past performance is shown, this should not be taken as a guide to future returns. Investment in the stock market is not a suitable place for short term money. The value of investments and associated income may go down as well as up and you may not get back the full amount invested.