I'll come onto the question of the options you have available in a moment.
Firstly, at the highest level, your decisions will depend on your Investment Philosophy i.e. what you believe about investing and investment markets.
You will need to consider what it is that you want to invest for. What are your objectives or the outcomes of the investment that you want? Are you investing for a house deposit or for your retirement, or something else?
Timescale and your capacity for risk will change depending on the purpose for which you are investing. For example, saving for a house deposit is much shorter term than saving for retirement.
Also, you have much more capacity for risk when saving for retirement than you do with a house deposit, because you have much more time to recover from a bad investment outcome by, for example, delaying when you retirement or accepting a lower income in retirement.
If your house deposit fund drops by say 40%, due to poor market conditions, and you had planned on using the money next month then you have a major problem.
Whilst your capacity for risk will vary depending on the goal, your attitude to risk is likely to remain pretty constant.
As far as options are concerned, you will need to consider which asset classes to invest in and how you wish to hold the investments, which means what tax wrapper, such as an ISA, you will choose, if any.
The 5 broad asset classes to consider are Cash, Fixed Income (Gilts, Treasuries and Bonds), Equities (Stocks and Shares), Property (commercial and residential), Commodities, and Alternatives. As a result of your investment philosophy you may decide that some of these asset classes such as physical commodities are not investable asset classes.
The main options for how to hold the investments are either directly or in an ISA, an Off Shore Bond, an On Shore Bond, a Pension or a Qualifying Savings Plan.
Control the things you can control and don't worry about the rest. for example you can control the costs associated with the investment. The lower the better.
There are no tried and tested, proven systems of predicting which active managers are going to beat the market or their benchmark next week, or month, or year, so don't try to pick managers. Just capture the market return as cheaply as you can and then stick with the program.
You will probalby want to have a written Investment Policy Statement, so that you know what you are going to do in different circumstances and you don't get swayed or blown off track by hype, or the latest fad, or emotions.
I hope that helps, but I am sure you will benefit from some individual advice and guidance. | 11.05.10 @ 12:32