Save or invest: what should you choose?

Do media stories about interest rates and market volatility put you off from thinking about money other than to make sure you can make ends meet? It doesn’t have to be that way. While money matters may not be everyone’s strength, it’s easier than you think to get your finances in order and set up some good systems to plan for the future. Our Plutus Wealth team takes a look at the main savings and investment options that are available to you. For a personalised plan talk to one of our independent financial advisers – find us on www.plutuswealth.com.

This article doesn’t cover pensions, but if you are looking to find out more about them, we’ve got you covered – find out answers to your pension questions here.

Savings vs investment

It’s easy to get lost in all the jargon. Think of it this way: any sum of money that you put away is a form of investment. This could be a regular payment or a lump sum and could range from as little as £10 a month. You could invest that in the stock market, or you could put money away into a savings account with a bank or building society.

What you choose will depend on the level of risk that you are prepared to take and how quickly you want your money to grow – in other words, your return on investment. With a few more months left before the end of the financial year, now is a good time to take stock and make the most of tax relief opportunities for 2019-2020.

Savings options

Let’s assume that you want to build up a small fund for something. It could be a new car, a deposit on a house or a wedding. Alternatively, you have around £50 a month (or similar) spare and want to put it away where you’re not tempted to spend it. In either of these scenarios you want to access that money in the next few months, and within no more than five years.

Savings accounts with your bank or building society, or a cash ISA (individual savings account) are your best options. Key things to know:

• No stock market exposure. Your money will not be exposed to the whims of the stock market, so you will not lose any of your initial investment.
• Lower returns. Less exposure means lower returns. However, depending on the product you choose, those returns may be guaranteed for the length of time of your investment. For example, locking your money away for two years for a fixed return will ensure you get that at the end of that term, even if interest rates fall.
• Easy access. Depending on the product, you could have easy access to your cash if you need it. It is worth bearing in mind, though, that for the greatest returns without withdrawal penalties, locking your money away for a set period of time is the most rewarding option.
• ISAs are tax-fee investments. This means that the interest you make is not taxed, unlike with a regular savings account.

Investing in the stock market

Now let’s assume that you have a bigger amount of money to invest; perhaps from an inheritance or the sale of an asset such as a business or property. Or, you have more time in which to watch your money grow and can take a greater risk with fluctuations on your return as they will even out in the longer term.

If this is where you are, then investing in the stock market could be right for you. Key things to keep in mind:

• Wins and losses. The market is in constant flux which is what contributes towards investments rising and yielding good returns on your money. This means that it can also fall, which could result in some loss of capital. However, over the longer term you are more likely to see an increase, which is why time is an important factor in this decision.
• Types of risk. Your attitude to risk is another crucial factor. You don’t have to be an adventurous risk-taker to see a good return on your investment. Again, this is linked to the amount of time you have to let your investment grow – the longer the better, for both cautious and adventurous investors.

Independent financial advice

Whatever your level of investment or length of time, if you are unsure of what is best for you, why not consult an independent financial adviser? Our Plutus Wealth team is well placed to help savers and investors at all levels. Get in touch with us on 020 7871 5200 or at info@plutuswealth.com and we’ll help you take your next steps to financial security.

‍