Monitoring Your Investment

Once you have decided how to invest your savings, it is important that you continue to monitor your investment to ensure your decision remains a prudent one. Savings accounts (see Savings Accounts), ISAs (see ISAs), Gilts (see Gilts) and Bonds (see Corporate Bonds) offer a degree of security in that your original investment is protected against loss: if you put two thousand pounds in a savings account or buy gilts or bonds of that value you will be entitled to receive your original investment in full when you close the account or when the gilts and bonds have matured. On the other hand, investments in property (see Property) or in company shares (see Shares) have a lot more inherent risk because your original investment is not protected: its value may increase or decrease depending on the share or property markets.

In order to protect yourself from huge losses it is vital that you observe the way in which your investments develop. You may not have the time or inclination to monitor the progress of your investment from day to day, nor would that necessarily make any sense. The share market is very volatile, and a low share price one day does not indicate that the shares will continue to lose value. However, if you are employing a stockbroker or financial advisor to assist you, ensure they give you regular updates on your investments. Do your own research independently to double check that the reflection they are giving you is a fair and balanced one. If appropriate, agree with your advisor on the amount of money that you are prepared to lose before you decide to sell your investment and discuss the common signs which warn you that economic unease is on the way.

For example, you have bought one hundred shares in a company at £10 each, and you are looking to sell these shares after one year. Within six months the shares have increased in value and are now worth £15 each. If you sell the shares now, you could lose out on even more potential profit if the share price continues to climb. However, if the share price begins to fall you will have missed the chance to earn £15 per share, a return of fifty percent on your original investment. It is a good idea to discuss with your advisor the way in which you would act in such situations, before you are faced with this scenario in real life. You may agree on a return you would like to achieve, such as thirty percent, and decide to sell your shares when they reach that value; you agree to miss out on some potential profit (if the share value climbs even higher) in exchange for earning the return you wanted. On the other hand, you may decide to wait for the maximum return possible, but agree to sell if the share value falls more than twenty percent below its highest value. In this case if the share value reached fifteen pounds and then began to fall, you would wait until the share value fell to thirteen pounds before you sold your shares.

Unfortunately it is more difficult to cut your losses and sell immediately when property is involved. Remember that any investment in property should be made for the long term, and you will need to remain flexible: deciding to sell your house in two years regardless of the economic situation at the time is reckless; ensure you have the time and financial stability to wait until selling your home will earn you a good return on your investment. Monitoring the valuation of your home is more difficult than monitoring the stock market, but you will need to be aware of the conditions that can affect the successful sale of your property. Remember that when house prices are booming and increase from year to year they will at some point even out and begin to fall. Although you may decide to sell your buy-to-let apartment when signs of a housing market slump appear, this may be just the time when finding a buyer becomes impossible. Do not be too greedy, remember the compromise you made with your shares; decide on the profit you would like to earn and sell your home when it reaches its target valuation rather than wait and see if it will earn even more profit later on.

As a broad generalisation, property is a good investment, but there are no guarantees that you will make the profit you expect when you come to sell your house. If you are lucky and the housing market booms you could make a great investment return, if you are unlucky you may make a small return or even lose money if you bought when prices were at an all time high. Remember that fees paid to estate agents, lawyers, your bank and property surveyors will also reduce your total profit. Ask your financial advisor to help you develop a clear business plan regarding the letting and / or selling of your property to try and earn the best returns. In addition, ask an estate agent for regular updates on the average price of homes in your area, how fast they sell and what effect environmental changes in the area, such as a new school or a new prison, are having on local property sales. Bear in mind you may have to sell your property sooner than you thought or later than you wanted if unprecedented economic factors would have a detrimental impact on your potential returns.

Investment opportunities which offer you more security will earn you the best returns when you take time to monitor the progress of your investment on a regular basis. Check offers from other banks and building societies to ensure that the interest rate you have is still competitive. Have regular meetings with your banking advisor to guarantee that the savings account you chose initially still meets your requirements and offers you the best terms and conditions.