Let’s admit it, picking the best investment is complex – there are so many different products to choose from. And there’s so much at stake when it comes to the question of where to put your money. This is your future, your home, your children’s education or your retirement.
How does an investor navigate this complexity in order to choose the best product? Let’s consider an example. Cars are complicated machines and there are a huge variety of makes and models. And there’s a lot at stake here too: it’s a significant outlay and it will carry you and your loved ones at colossal speed, so it needs to be safe. But consumers still manage to choose the right car for them, even if they don’t know exactly how the engine works.
So what is different about investing that is so much more difficult for the consumer to overcome?
Cars are defined by the purpose they are built for; compact hatchbacks perform a different function than MPVs. Within each classification there are defined and measureable lists of options and features that let car markers demonstrate value for money in a clear way consumers can understand.
On the other hand, investments are still largely defined and marketed in terms of the components they are built from, not in terms of the function they perform. Emerging markets or special situations? Corporate bonds or commercial property? Active management or passive tracking? As if these decisions aren’t difficult enough, the way investment products measure their own performance can make a like for like comparison very tricky.
The good news is that armed with the appropriate facts and the help of a good financial advisor, you can buy investments like you buy a car; you’ll end up with the best investment for your needs and you can be comfortable that you’re getting good value for money.
We suggest you:
- Define your financial objectives: what you’re saving for and your timelines
- Figure out what level of risk you’re willing to take. This will depend on your objectives, personal preferences and circumstances.
- Choose an appropriate product for your chosen level of risk.
A good financial advisor can help you with this.
Additionally, asset managers like BlackRock, Vanguard and Skandia are starting to develop risk-based funds, meaning finding a product to match your circumstances is getting easier.
Our free-to-use website InvestorBee can help too. We evaluate over 700 funds that are already purpose-built, self-contained investments. For your chosen level of risk we clearly show you how to invest in products that have delivered the best value and those that haven’t.
Finding the best investment doesn’t have to be all that complex. With the right help you can be confident in what you’re doing.
This is a guest blog post by Jon Hoar of Investor Bee