A full financial plan will have many aspects, short term cash, short term investments and long term investments.
Leaving too much in cash will erode the value and therefore you will “lose money”. This is due to the level of interest received and the impact of inflation. Part of a full financial plan will invariably have money invested into a stock market investment within various wrappers.
Any stock market investment can lose money, the nature of stock markets is that they rise and fall.
When investing into this type of investment, it is important to consider this when committing to an investment.
A good financial adviser will fully consider all aspects of your overall financial position, such as length of time you wish to invest for, your attitude to risk, your capacity for loss. Based on these criteria and the most important element an open discussion, a good financial planner, will build a structured and tailored investment plan for your needs.
This could include investments in cash, bonds, UK equities, overseas equities, property and alternatives. By spreading investments across a variety of sectors and currencies you are spreading risk.
If you are unfortunate enough to receive bad advice, you do have recourse by investing through a financial adviser, you have a right to complain to the company directly, they will adhere to their complaints procedure it is a Financial Conduct Authority (FCA) requirement that every complaint or expression of dissatisfaction of service is recorded and a strict process followed to investigate the complaint within designated timescales. If at the end of that process you are still unhappy with the outcome, you can refer your complaint to the Financial Ombudsman (FOS), they will conduct an independent investigation.
It is noticeable that many people that do not use the services of a financial adviser, select a very limited number of funds and/or shares, by not diversifying a portfolio and having limited holdings it often leads to unprecedented falls in value which are extremely hard to recover. You are also not able to refer a complaint to the FOS.
The Financial Services Compensation Scheme also offer protection when savings and investments that are made through banks, building societies, firms and providers fail, details of which are available at www.fscs.org.uk.
So, investments do sometimes lose value, this can take time to recover, but the use of a financial adviser that is building a short term and long term plan can help to minimise that loss, allowing potential falls to recover before the need to withdraw monies.
Equity investments do not afford the same capital security as deposit accounts. Your capital is at risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested.
Please note: This blog is for general information only and does not constitute advice. The information in this article and all others in The Learning Hub is aimed at retail clients only.