The best age to take risks and reap rewards

Frances Kemp talks investing for the 20 something and creating a priority of needs.


The concept of investing can be fairly alien to those whose incomes are quickly swallowed up by rent, travel costs, school shoes and the like.  This will no doubt change once workplace pension legislation filters through the smaller businesses over the next couple of years, as those aged over 22 will be forced to at least think about it.

With increasing financial demands placed upon our countries young, they can be forgiven for failing to 'save for a rainy day'; yet they are the ones with the timescales that can afford them to take additional risk, and thus, potentially, reap higher rewards.

Although officially out of recession and with unemployment rates falling, our country's population is ageing and so perhaps now is the ideal time for investment virgins to take the plunge.  It need not be complicated nor scary with the right advice.

Interest rates remain at an all time low, as they have been for some five years now, and any increases to this are likely to be minimal.  Without realistic benchmarks, where are investors to turn?  The answer is very simple.  They should set their own benchmarks, guided if they wish by advisers qualified to identify these.  Most will consider a return that at least covers charges and inflation, thus preserving the 'real value' of their investment.

Setting clear goals and implementing investments within comfortable risk levels could help achieve many things.  Repaying the mortgage early, funding the 'reassuringly' expensive schools fees, driving lessons for the children, a deposit for their first house, not to mention planning for income in retirement.

A common myth is that investments are something different from pensions when in fact investments form the foundation for many tax efficient vehicles such as Individual Savings Accounts, Bonds and Pensions.  These are merely 'tax wrappers' enabling investors to benefit from tax reliefs and other perks.  Fundamentally, the same investment funds could feature in them all.

Being an independent financial adviser, a strict 'priority of needs' is established first.  After available budgets are directed towards protecting themselves and their families, any surplus funds could be assigned to differing investment goals, timescales and risk in order to achieve the many goals we all would like to achieve in life.

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