Investing to pay for a future expense
Whichever of the above categories you fall into, you don’t want to put your capital at too much risk. And you want to see a return that will see you achieve your financial goals
If this is the type of investment strategy you’re looking to follow, there is one common thread here. And that’s compound interest.
You want to see your savings snowball larger and larger over time.
The best and fastest way to achieve this kind of growth is to ensure you don’t make any withdrawals from your capital or any interest you receive. And you need to make sure you pay the lowest fees you can for your investments.
To do this without taking on a lot of risk, the best investment options are bonds and other income generating investments. You should keep your exposure to shares to a minimum to lower your investment risk.
Unit trusts may be the perfect vehicle to help you achieve your financial goals
You could look to invest in a unit trust that concentrates on investing in bonds or other income generating investment, which has a long-term investment horizon.
It is also worthwhile conducting regular checks on the performance of the fund to ensure that it’s performing as you need it to. And make sure you’re not too ambitious with the rate of return you expect to achieve.
When weighing up different options, make sure the investments you look at match your time horizon.
For example, if you’re saving to pay for your children’s education, which will begin in ten years’ time, you want to look at investments that mature around the same time. For instance, ten year bonds.
You’ll find that many of the fund managers have products tailored towards saving for a financial goal, such as your children’s education.
So there you have it, how to use investments to achieve financial goals.
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