Basic Investment Strategy

How long can you invest?

If you need to get at your money easily, or might need it back at short notice, avoid investments where you have to give a long period of notice before you can withdraw your money (for example, building society 90-day notice accounts), or where there are penalties if you want your money back too soon (for example, many types of life insurance). Don't commit yourself to regular savings schemes if you're not sure that you can keep up the payments - choose a more flexible investment where you can save varying amounts at irregular intervals.

How much risk can you take?

In general terms, you need to take on more risk for the chance of a higher return. There are three main types of risk:

- losing capital. With investments such as shares (including investments linked to shares - for example, unit trusts and unit-linked life insurance), the amount of your investment can fall as well as rise, as the market price of the shares falls and rises>- losing interest. Some investments, such as most building society shares and accounts, offer a rate of interest which will go up and down in line with the general level of interest rates. This might be a problem if you need a reasonably steady income - s>- inflation. With some investments - for example, building society accounts and National Savings deposits - your money earns interest but the amount you originally invested - your capital - doesn't grow. The problem here is that even a modest rate of infl>

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You may be tempted to put off retirement planning until you're older, but it takes a long time to build up enough to provide a good pension so pension saving should start as early as possible. If you belong to a pension scheme through your job, you might think there's no need for you to do anything, but you should consider whether you need to make extra contributions, and whether or not to stay in part of the state pension scheme. If you're self-employed, you should contribute to a personal plan. (For information about pension planning, see the Which? action pack, Choose Your Pension.)

Protecting... see: Pensions

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