Managing Director of Pensions and Investments, Lloyds Bank
Ready-made packages could help more people take their first tentative steps into the world of investment.
We all like to see our money grow. We also recognise that investing is another way to see a return on our hard-earned cash. However, we may not always be confident in going down that route. With a little support, experts say investments can be accessible and simple and can start with a small amount that builds over time.
Long-term investment and compounding
Money experts point to the importance of saving to build financial resilience, so we are prepared for unexpected bills or changes in circumstance — or if we have a larger goal in mind.
Jackie Leiper, Managing Director of Pensions and Investments at Lloyds Bank, suggests that for those looking to save money in the medium to long-term, investments can also offer advantages and opportunities alongside their savings.
Investing in the stock market, for example, means investing in an asset such as a company, which itself has the potential to grow. It can offer further benefits in what financial advisors call compounding. “This is when you take any income, such as interest or dividends, and re-invest it on top of the original amount,” she says. “This means you can earn income on the new, larger amount — helping you to reach your investment goals quicker.”
Risk versus reward
Of course, while the rewards can be pleasant surprises, there can be dips in the market, and all investing comes with risks. The key question to address is: how much risk are you comfortable taking to reach your investment goals?
As Leiper explains: “When weighing your different goals, it’s important to understand how much risk you want — and can afford — to take. This will be determined by factors, such as your personality, your investment goals and where you are in life.”
She suggests asking yourself questions about how comfortable you are with the idea of losing money in the short-term, and how long are you able to commit your money?
“If you keep your money in a savings account, for example, you will see a return in the form of interest — but if this is lower than inflation, you will be losing money in real terms,” she says. “Investing in the stock market can bring with it the chance of higher reward but with the risk that all investments have: that prices can go down as well as up.”
When weighing your different goals, it’s
important to understand how much risk you
want — and can afford — to take.
Invest with the help of experts
It is a case of balancing and weighing these factors as there is a clear connection between risk and reward. To avoid taking on too much risk at once, people may consider investing smaller amounts over the longer term.
Not all investments are equally risky. Ready-Made Investments can enable people to invest in a diverse mix of investment types with the help of experts. These are packages of different investments which are looked after for you by a specialist, and it means you don’t have to choose your own stocks and shares.
“To get started, you simply choose which risk level you’re comfortable with — Lower, Medium or Medium-High — and how much you want to invest,” says Leiper.
Get more shares for your money
Lloyds Bank offers Ready-Made Investment services alongside support tools and tips around investing and managing money/financial planning.
Leiper says: “Investing little and often over the long-term can help to smooth out the peaks and troughs of the market. This is because you will be investing each month, regardless of whether the market is low or high. Invest when the market is low, and you get more shares for your money. It means you don’t need to worry about when is the right time to invest as it should average out over time.”