Identify your goals &Income or specific goal
The first thing to think about when setting your investment strategy is to decide what you're investing for:
To supplement your earnings or boost your pension
To meet a specific goal, such as buying a second home
Your life stage
Next up, you need to consider that your financial goals will differ at different stages in your life (and of course, you can have more than one goal):
If you're young, your investment goal might be a deposit on a home, or being able to afford to take off time from your career to study, retrain or take a year off
If you have children or are thinking about starting a family, you may consider saving for school or university fees
You may start thinking about creating an income for retirement.
Time frames
The length of time you have to meet your goals also plays an important part in shaping your investment strategy:
Medium-term goals (five to 10 years) cover things like saving for a deposit on a home
Long-term goals (over 10 years) cover things like saving towards your retirement income.
Work out how much money you'll need
Your investment strategy needs to reflect the amount of money you need to reach your goal.
You need to be realistic about the amounts involved, and whether they're likely to go up. This is particularly important for long-term goals, such as funding school fees and generating income for retirement.
Understand your attitude to risk
If you have goals with a shorter time frame you may not want to take much risk, as your investments will have less time to recover from sharp falls in markets. If you're investing for a longer period of time, such as for retirement, you might be comfortable taking more risk with your investments.
Aim for tax-efficiency
Whatever investment strategy you follow, it should be as tax-efficient as possible. Investing via an ISA and investing into a pension both have significant tax advantages.
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