There are more options out there today for those who have a little money to set aside than ever before, whether it is playing the stock market, investing in property or even starting a business. But while ideas like these are great for long term returns, what if your saving and investment aims are a little more modest? Perhaps you’d like to set aside a hundred pounds or so every month for a holiday or Christmas fund?
Start with a cash ISA
As ISA is the investment product that even those with no interest in finance have heard of, and it should be your first port of call, particularly if your saving aspirations are on the modest side. If you can afford to put away £50 to £100 every month, then a cash ISA is the way to go. Use a company like Wealthify and they will make sure you are getting the product that is most appropriate to your needs.
Play the markets with an investment ISA
The cash ISA has plenty in common with a savings account, in as much as the money sits there accumulating interest. The advantage, of course,3 is that the interest is tax free. The disadvantage is that interest rates are not much to write home about at the moment, and there is every possibility that the recent slight increases might drop again after Brexit if the economy shows signs of trouble.
While nothing is ever certain, there are some who feel stocks and shares might offer a better return under these circumstances. You can still take advantage of your tax free allowance by opting for a stocks and shares ISA. The benefit here is that if you keep investing a small amount each month, any short term market volatility is something you can easily ride out.
Larger sums? Diversify!
With £50 or so per month, a single investment fund is going to be just fine. But if you can afford to inject a little more in, then you need to start thinking about diversification. The idea here is that if you have eggs in different baskets, then even if one asset type is struggling, others will be thriving.
Investing in stocks from different markets is always a good idea, as social and political events, for example the recent trade dispute between the USA and China, can have just as big an impact as purely fiscal factors. You can also look at diverse investment types, for example adding commodity investments to your portfolio and even exploring the cryptocurrency market.
The fundamental things apply
Whether you are investing a large or small amount, and whether it is a regular payment or a lump sum will, of course, influence your strategy. However, across the board, there are some fundamental principles that always hold true.
These include your risk appetite, the time period you are contemplating and whether you need ready access to your cash or you can afford to have it tied up for months or years. Be clear on these points before you start thinking about anything else.