The first step in choosing an investment is deciding what you what to achieve. Ideally, you should have a reasonable idea of how long you want to invest for and what sort of amount you are looking to generate. You don’t need to be overly precise here. In fact, a little bit of vagueness is preferable. No investing plan will play out exactly as you think, and you’ll need to monitor and tweak it along the way.
Arguably, the two most common investing goals are retirement funds and providing for your children.
For most people the main reason for investing is retirement. The real value of the Basic State Pension dwindles each year it seems. In the UK, the government taxes employed folks and uses that money to pay out pensions. Years ago, everything was tickety boo, because there were lots of employed people and relatively few pensioners. However, our population is ageing and the sums simply don’t stack up anymore.
In order to relieve the pressure, pension increases are now relatively modest and the age at which we can collect our State Pension is being pushed back.
The message is clear, we can’t rely on the government to fund us through our twilight years. We have to do that ourselves.
Don’t you wish that you had had a lump sum when you turned 18 or 21 to get started in life? Perhaps you did, and you realise what an enormous difference that made. Investing is most powerful when you start early, and you can’t invest much earlier than when you are still wearing nappies.
You might want additional funds to give your kids a better education, or to pay for university fees. With forethought and planning, investing can give you this option.