If you can’t decide what’s a suitable investment for you can ask yourself the following questions and by giving honest answers you should find a solution.

1. How much risk can you stomach?
There is no right or wrong answer to this as risk to one person is different to that of another. Simply ask yourself to what extent you are willing to see your money fluctuate in value and how the return is compared to inflation. If the answer is ‘not much’, stick to investments that fall into a low risk category. If the answer is ‘don’t mind too much’ look at investments classed ‘medium risk’, and if you are willing to accept a high level of capital fluctuation, check out the investments that I have categorised ‘high risk’.

Your portfolio should have a mix of assets to reduce your risk factor.
You should also remember that there is a direct trade-off between risk and reward: the more risk you are willing to take, the more likely you are to see your money grow over the longer term.

2. How long can you invest?
Remember that you should include all your assets, for example your land/house/rented property into the balance sheet when looking at your investment portfolio.

The question of what is a suitable investment for you will largely be dictated by how long you intend to keep your money invested for. Investments like unit linked funds and savings policies/SSIA’s rarely have a fixed investment term but because they are investing in the stock market, you need to take at least a five-year view to ride out any short-term downturns. You do however have access to some of these investments at any time but there may be early encashment charges.

Less developed markets may need more than five years. Funds (Specialist funds) in the volatile/ undeveloped markets may need more time before you can be reasonably sure of getting out more money than you put in as some of these markets are yet undeveloped and have different trading rules for foreign investors. Taking an extreme example, Japan spent the whole of the 1990s in the doldrums and by mid-1998 the Nikkei 225 index – the key measure of the Tokyo stock market – was at a lower level than it was in 1990. Only in 1999 did it start to perk up. This Market is down and there is a problem of low consumer confidence, yet there are some signs of the authorities making the right moves.

If you have less than three years before you need to call on the money, it may be best to keep clear of stocks and shares – as you may well get back less than you put in unless there are underwritten guarantees. Deposit based products may be the answer but you may get back less than the rate of inflation on these funds and therefore have this risk factor to take into account. (In fact, as soon as your time horizon to use all your funds gets toward three years you should start to move money out of the stock market in order to conserve the gains you have made).

The minimum time-period for some investments will be dictated by their terms and conditions or charging structure. Life company bonds, for example, often need at least five years because the bulk of their charges are taken in years one to five, and it is only after five years, that you start to see your bond really start to grow in value. Every form of investment has a cost factor (Total expence ratio’s/Reduction in Yield) attached to it and be prepared to pay for professional advice to achieve your goals. If you are unsure how long you can remain invested, ask an independent financial adviser whether certain products will penalise you if you need to take your money out earlier than expected.

3. Ask yourself ….What are you investing for? What control you want.

This is the start and maybe the simplest question to ask – but many investors fail to ask themselves exactly why or what they are investing for although once they done so, other issues such as a suitable level of risk and time horizon will start to fall into place and you will also see that you could get more from your extra money.

For example,
• It may be that you are investing a lump sum of money with a view to providing a son or daughter with a nest egg – in which case, your time horizon may up to 18 years .It also means you should concentrate on investments designed to produce capital growth rather than income. This means that your investment has the time to ride out stock market volatility and therefore means that you can afford to take a look at a fairly high level of risk.

• Alternatively, you may be approaching retirement and looking to invest with a view to providing income to boost what you are getting from your pension. If this is the case, your priorities are likely to involve generating a high yield and keeping capital volatility as low as possible. You may also have options in Approved Retirement Funds since the Finance Act 2000 and your Independent Financial Advisor can look into this with you.

• On the other hand it may be that you just want to get more out of your spare cash, Personal or Corporate, than you can by leaving it in a savings account or indeed a current account. If so, why not take your pick from some of the investment funds/options on offer. If you are simply mopping up whatever cash you have spare from your salary, it may be worth using a fund manager’s monthly saving scheme.

So before you start analysing your investment options, sit down and work out what you are trying to achieve with your investments with your advisor. Once you have worked through these issues you can start searching for an investment that will fit the bill.