Your investment questions answered

Q: I’m making a stockmarket investment. Would I be better off investing a lump sum or saving on a monthly basis?

A: The answer depends upon future market movements. If you invest a lump sum and the market increases rapidly, you’ll benefit from this upward movement.

Conversely, if the market suddenly falls after you make your investment you might be somewhat annoyed. Investing on a monthly basis could help reduce this problem, as if the market falls then your next monthly investment will purchase shares at a lower price – good news if the market then recovers.

However, if the market rises consistently, then you may be worse off compared to a lump sum investment. As you can see, there is no correct answer as such, more a case of choosing the option with which you are most comfortable.

Q: Are the cheapest investments the best ones to go for?

A: Not necessarily. You should focus on value for money and this does not always mean the cheapest. To be good value, an investment should provide a reasonable return after charges. Look for good performance potential with reasonable charges and you're unlikely to go far wrong.

Q: How much risk should I take?

A: The answer is simple, as much as you’re comfortable with. There is no point investing in very exciting high risk investments if this will keep you awake at night with worry. You may find that over time you are more comfortable taking a higher risk approach, as your experience in the world of investment increases.

Q: How much money should I keep in the bank or building society?

A: The answer to this question will depend largely upon your own preference, but it is worth bearing a few points in mind.

Firstly, overall returns on cash deposits are relatively low in the greater scheme of things. Investments such as stockmarkets, fixed interest and property have tended to produce healthier returns over periods of five years or more. Therefore, holding too much cash in a deposit account could mean you're not making the most of your money.

On the flipside, it is important to keep a reasonable amount of cash on deposit, as this can act as your rainy day fund in times of need. As a very general rule of thumb, you may wish to hold somewhere between 10 and 40 per cent of your overall investments in a deposit account.

If you would like to find out more, please email or contact us for further information.

Levels and bases of, and reliefs from, taxation are subject to change.

Prior Knowledge is an appointed representative of Sesame Ltd. The site is intended for UK consumers only. Principal: A Prior