An investment is the process of putting money into an asset that has potential to grow in value over time. This can be used to fulfil various financial goals such as buying a home, planning for retirement or providing education for children. Investments can be made in a range of instruments such as shares, mutual funds and property. The risk associated with each instrument varies.
Your personal circumstances will affect how much risk you can comfortably take. For example, an investor’s age and responsibilities play an important role in their ability to handle market fluctuations. Younger investors may be able to cope with the ups and downs of investing in higher-risk investments like stocks because they have more time to recover from losses.
How you react to market changes is also an important factor in determining your tolerance for risk. If seeing your portfolio drop in value makes you anxious or gives you sleepless nights, you might want to consider investing in lower-risk instruments such as fixed income securities or cash alternatives.
It’s vital to research all your options and invest only in products that you understand. If you’re unsure, seek professional advice. This can help you choose the right instruments for your investment needs and avoid costly mistakes. You can find regulated advisers on our Financial Services Register. However, it’s essential to remember that if you invest with a firm not on the register, you may not be protected by the FSCS or FOS in the event of problems.
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