The more risk you take with your savings, the greater the likelihood you will lose some or all of your money. Equally, the more risk you take, the greater the potential for higher returns – but there is no guarantee that you will get these high returns.
Cash deposit accounts are widely considered to be less risky than investment funds. However, what you may not realise is that with interest rates so low, your savings could be losing money in real terms. Indeed, placing your savings in share-based assets, such as investment funds, has proved to be the best way of achieving growth that outstrips inflation over the longer term. There is, of course, a risk attached to investing, but your money has more time to recover from any falls in the markets.
It is therefore important to think about your time-scale when selecting a home for your savings. If you have short term objectives or may need to withdraw money quickly your choice would probably not be the same as if you are saving for the longer-term. Make your savings risk appropriate Risk comes in various forms – your financial adviser can explain more and help you work out how much risk you are able and willing to take.
The value of your investments can go down as well as up, so you could get back less than you invested. An investment is not the same as a building society/bank account where capital is guaranteed and, with instant access accounts, is readily accessible. Inflation will reduce how much your savings are worth over the years.