No matter where you keep your money, you need to try to keep it safe. None of us wants to end up in a nightmare scenario in which we lose our capital and end up in a real mess, counting the cost financially and emotionally. But what can we do to look after our assets to avoid this?
Here are some things you ought to know when it comes to protecting your money:
Have a proper investment plan
Any investor should prepare a proper plan for their portfolio. There are various forms of risk to your capital – from depreciation of your assets to a poor investment choice and lack of security – and your plan needs to identify these and outline how to tackle them.
Clearly different assets have different risks – with the value of properties affected by different market forces to those which impact on people engaged in share dealing, for example.
You need to have a ‘worst case scenario’ in mind for all your investments and not take on any risks that you either don’t know or can’t cope with.
Check the protection offered to your investments
It pays to pore over the paperwork of any investment you make so that you know the full terms and conditions of what you’re getting into.
In particular, bear in mind that some investment products are provided by companies that are not regulated by the Financial Conduct Authority (FCA) and, in which case, will not be covered by the Financial Ombudsman Service or the Financial Services Compensation Scheme. You can check if they are regulated by the FCA by searching the register online.
Use market techniques that can help
You can build in protection for yourself when investing on the markets by using ‘stops’. That means you can, for example, say that you will automatically sell a share if it drops to a certain price, which prevents you from seeing the value of your assets plummet below a level that you are comfortable with.
You need to think carefully about where you set these limits as you might not want to just ‘sell up’ amid a short term drop in value but they do allow you to avoid getting caught out by a fluctuating market.
This is harder for other forms of investments but you can still have a ‘stop’ in mind where you, for example, set a price you’d be happy to accept for a property or a value at which you’d sell a valuable piece of art.
Understand the savings rules
Any account you have in a UK regulated bank will be covered by the Financial Services Compensation Scheme (FSCS). From this January, that has meant that £85,000 (per financial institution) is protected and you’d get it back if they went under.
Get the advice of a pro
Financial advisors have ‘been there, done that and got the T-shirt’ when it comes to every type of financial investment that you could imagine. They know the risks and will have seen countless people sink or swim over the years. Tapping into the knowledge bank of such an expert could really make a difference to your chances of success.