It may come from an inheritance, a bonus or years of diligent saving, but if you have a large lump sum, there are important questions you need to ask when deciding where to invest it.
What do you want this money to do for you?
Do you want it to help create financial freedom? This might be the freedom not to work, or to have more choice over the work you do. You might want to start a business, for example. In this case, the money can be invested to create an income to support you.
There are other options: You may want to pay for your children’s education, or build up a pot for retirement. Each of these goals will influence the time frame for your investment and therefore the type of investments you should consider.
How much are you willing to risk?
People have different attitudes to money. Some are comfortable with the idea of taking shorter-term risks to the value of their capital in pursuit of higher long-term returns. For others, it is uncomfortable to contemplate any volatility in the value of their pot.
This may also be determined by the overall level of your wealth. If you have alternative sources of income and capital, you may be more willing to take some investment risk with your lump sum.
What are the tax implications?
All investment should be made with an awareness of the tax consequences. This will vary based on where you live and your personal circumstances. Taking advantage of tax-incentivised savings options will help minimise your tax bill.
At London & Capital, we have been helping people invest their money wisely for decades. To help answer some of these fundamental questions, please give us a call on 0207 396 3200.