Is now a good time to invest?

Recent UK financial headlines would suggest not: sterling hits an all-time low against the US dollar in September, the Bank of England makes emergency moves to attempt to calm markets… And all this against a challenging global backdrop with the intensifying Russia-Ukraine conflict and Covid-19 cases ticking up again.

But although the current economic environment may appear difficult, there are often opportunities alongside challenges in any market environment. This is why the question should always take your personal circumstances into account: is now a good time for me to invest?

Start with you

As difficult as it can be to ignore current financial headlines, sometimes that could be the best thing to do. You could instead start by thinking about you and your financial situation. Do you have savings? Where are they deposited/invested? Do you need them for specific goals, and have you accounted for a “rainy day fund”?

These are just a few questions you could start thinking about, if you have not already. There are many more considerations that could affect you including: tax implications, pension pots, level of income needed, among many others. These can be more complex areas and could require expert analysis and advice.

A financial adviser could potentially help you with the more specialist areas of investing, but also the perceived “easier” questions if you are feeling overwhelmed and do not know where to start.

Already started? Don’t stop!

Do not fall into a false sense of security if you already have a financial adviser and a financial plan in place. When did you last revisit your plan and consider any changes in circumstances? It could be that what was right for you six months ago may need adjusting now.

Investing is not for me

It doesn’t have to be.

Meeting with a financial adviser does not mean sitting in a room choosing which company shares, or which country’s government bonds, to put your money in.

An adviser could help you think about what you want to achieve with your money, and what level of risk you might be comfortable with. They could then suggest some options that fit with your personal goals and risk tolerances. If you then decided that investment was right for you, the decisions of what type of individual assets (shares, bonds, gold, copper, etc) to invest in would be made by financial experts. However, the value of investments and the income from them can fall as well as rise and are not guaranteed and the investor might not get back their initial investment.

I cannot afford to invest

You do not necessarily need millions to start investing. There are lots of different investment products and some could have deposit amounts far less than you imagine.

The cost of living crisis has the potential to lead people to think their “rainy day pot” needs to be much bigger as prices rise and we use more energy going into winter. While it is usually sensible to have an emergency fund in place for unforeseen expenses, it is not necessarily sensible to keep large amounts of cash in current accounts or “easy access” savings accounts that pay low levels of interest when inflation is high.

Inflation is a measure of how much prices are rising. Typically, inflation looks at what goods and services cost now compared to a year ago. If prices are 10 per cent higher now than a year ago, but your savings account only pays 2 per cent interest per year, then the real value of what you can buy with your cash is less than it was. This eroding characteristic of high inflation is why it is important to consider how much cash you hold in bank accounts.

The more pertinent question here is: can you afford not to invest? What is right for each person will depend on individual circumstances.

Thanks for the heads-up – I will move all my savings into an investment

Wait!

Let us rephrase the question: Is now a good time to start investing?

Markets can move up or down quickly and with no warning. These movements are very difficult to predict and, if you invest a large amount in one go at the “wrong” time, ie invest when markets are high before a big fall, you could lose out.

It could make sense to speak to a financial adviser. They could help you understand the options available, such as investing smaller amounts regularly, and help you decide what is right for you.