Step 1: Understanding more about you
Before deciding which products suit you best, it’s important to understand your
own personal perspective on saving and investing.
To decide where to put your money, ask yourself questions such as:
- Am I saving for the long term or am I more concerned about the next few months/years?
- Do I want a steady, dependable return, or a higher return with the risk that my
money may go down in value?
Short term versus long term
Knowing when you are likely to need your money can help you decide where to invest
it.
- Shares can go up and down in value in any year.
- Cash investments – like savings accounts – are relatively more stable.
- Other investments – like fixed interest and property – are in between. (They don't
usually go up so much in value in any particular year but they don't go down so
much either)
Risk versus return
The graph below shows the trade off between risk and return when it comes to savings
and investments.
For example, shares generally have the greatest expected risk but also the greatest
long-term return. So if you have money to invest for 10 years or more – such as
for retirement – shares may be a good option for you.
Make sure you fully understand and are comfortable with all the products you are
investing in, including their risks.