Should I Continue To Invest?

Posted on: 17 February 2009 by Gareth Hargreaves

50connect reader Alexander asks independent financial advisor Peter McGahan for some much needed investment advice.

I have £7,000 in an investment which has come to the end of it's 5-year term.

In recent months it has lost £1,100 and now I’m seriously thinking of putting it in the Co-operative Bank on a 3-year term Bond getting 3.50%.

I'm too afraid of investing it again; I really can't afford to lose anymore as I’m a pensioner. What's your opinion?

The decision to invest relates to two factors - how much gain you want (growth or income) and how much fluctuation you’re happy with (i.e. how much can you be happy to see your capital fall in pursuit of your gain).

If you want to beat inflation over long periods of time, consider that you will need to take risk with your capital. If you don’t want to take risk with your capital, be mindful that you will struggle to beat inflation.

Inflation is currently running at 3% so your return is actually at only 0.5% over that. If you spend anymore than that, your capital will be falling in real terms so be careful.

However, I’m more than confident we will be going into a deflationary environment and I suspect 3.5% with hindsight will be an excellent decision, especially with no risk.

Remember to seek advice from an Independent financial adviser so as not to lose any of the tax benefits of the Isa whilst doing the transfer.

Peter says:

Investing can seem daunting, but once you get behind the jargon, the basic principles are easy to understand.

Alexander asks:

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