What funds should I invest in now?

(I-Newswire) November 21, 2009 - This is the number one question I get asked all the time. Where is good to invest?

In truth the answer is very simple – everywhere. This is because the golden rules of investing are that you spread your money around and don’t put all your eggs in one basket.

In practice the way in which you do this is a little more complicated, but can still be done easily with a bit of thought and research.

If you have money to invest and are not sure where to begin then don’t worry. There are a few rules you can stick to that will help you put a list of funds together before you know it.

Here they are:

Understand your risk profile
This means you should work out whether you would be happy to invest in more risky assets or would prefer a bit more safety and invest in lower risk assets. Generally assets that are higher risk have a greater chance of falling in value and a greater chance of going up in value by more than other investments. This is why they are high risk, because they could go either way but the pay off for this uncertainty could be very rewarding.

You can work out how risky you are prepared to be with your money (your investor profile) by looking at how much money you are investing compared with how much you have (i.e. whether you could cope with short term falls in value financially), whether you are the sort of person that will suffer sleepless nights if you money goes down in value, and how knowledgeable you are about investments as this will help you understand the risks involved much better and therefore worry less if they fall in value for a short time.

Once you know more about how much risk you are comfortable taking you are ready to start looking at funds.

Invest in a mixture of sectors
The more you can spread your investments around the less chance they have of being exposed to one single sector or country.

The sort of sectors that UK investors typically invest in are bonds (corporate and government), UK and European equity, international equity, emerging markets and smaller companies funds.

Bond funds are usually lower risk and provide a lower but more predictable return, whereas equity funds are higher risk and can provide a higher rate of return. Smaller company funds and emerging market funds are more high risk than normal equity funds but have the potential to provide even greater rates of return.

One rule that people consider useful is to take your age (say, 40) and invest that percentage in bonds (say, 40%). Then invest the remainder of your money across equity funds like the ones mentioned above.

I should say that there are many other types of funds and many other different sectors but the ones mentioned above are simply the most popular and main sectors that people tend to start with, particularly if they are inexperienced.

Hold them for the long term
Investing is not a short term game. If you are investing in the hope that you can make a quick buck then unless you have really done your homework this will be not much more than a gamble. Real investing is about picking a broad range of areas to invest in and holding them for a long period of time. During that period there is no reason why you cannot cream off some profits when the time is right or sell some of the profits to invest in other funds that may have gone down in value.

Monitor your funds
It’s always useful to be able to monitor your investments whenever you want to. Whatever you invest in make sure you invest through a service that provides you with online access to valuations so you can check the value of your investments whenever you want. Plus you want to have the ability to buy and sell your investments whenever you need to. This will also help you ensure your investments remain suitable for you and your needs over time.

Please note: none of the information above constitutes a personal recommendation.

For more information please visit http://www.investorprofile.co.uk

Good luck!

Jaskarn Pawar
Director, Investor Profile Ltd

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