When you invest, you hope that your investments do well. You want to deposit your money, then watch as it grows.
Funds that perform well are good news for investors, but not all investments go to plan. All investments are a risk, and some are riskier than others, so you could end up losing money.
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When you first invest, you’ll choose a fund or portfolio. Your fund or portfolio determines where your money is being invested. You might invest in government, in overseas businesses or in eco-friendly green companies.
Each fund you’re offered will have a risk level, decided by how successful these businesses or organisations should be. If a business does well, share prices rise, and your investments will grow. If things don’t go well, your investments could decrease.
Roughly speaking, the greater the risk, the greater the potential returns. If you play it safe, your money might grow at a fairly slow pace, while losses will be smaller (if they happen). If you take a big risk, then it could pay off, but there will also be a bigger risk of losing rather than gaining.
A financial advisor should work with you to determine your attitude to risk, so they know if you’re happy to accept a higher risk in the hope of greater returns.
If you can’t afford to lose any money, the investment will not be right. There are safer ways to help your money grow, like standards savings accounts and Cash ISAs. If you can afford to take some risk, deciding how much will help you decide where your investments should be made.
If your investment bond risks aren’t made clear to you when you buy the product, you may have been mis-sold it, and you could be entitled to claim compensation.
Most sales advisors are legit, and it’s not common to have someone sell you a product without explaining the risks. You’d need to show clear evidence that the full extent of the risks weren’t made clear to you in order to claim mis-selling in this way.
When an investment bond is mis-sold, it’s usually because the charges involved, including commission, weren’t fully disclosed or because the product wasn’t suitable for the customer’s circumstances. And if you’re in a position where you shouldn’t be buying a risk-based product, then again, you might have a claim.
Studies show that many investors expect higher returns than they get. Many people invest with the hopes of returns of around 10-15%. In reality, it’s very rare for investments to do that well.
Some investments will be better than others, and every year brings different results, but a sensible expectation is a growth of roughly 5%. Most investors see a growth of between 4% and 7% per year. Of course, this is just an average, and some will do much better whilst others do significantly worse.
You might think that investment gains simply rely on good luck, but actually, you have a part to play in helping your investments to do well.
Even if you take a hands-off approach, you can choose to transfer your investments if the funds you've chosen don't perform how you initially expected. Moving your investments could help, but there's also a chance that fund performance could improve the moment you transfer away.
Another way to influence gains is to time your withdrawals correctly. The goal is to buy low when shares are cheap and sell high when the shares are more expensive. Many people panic at the first sign of trouble and withdraw whilst their gains are decreasing, but if you're confident enough to leave your money alone, then you'll likely see share prices rise again.
Investing isn't like gambling. Studies have shown that roughly 90% of gamblers walk away with less money than they started with, but the opposite is true for investing. You're investing in businesses that want to do well, and their success is what leads to yours. As a rough guide, around 90% of investors see some financial growth. A vast majority walk away with more than they've paid in, though for some, that could be a growth of 50%, and for others, it could be mere pennies.
Only around 10% of investors walk away with less than they paid in. However, 10% is still a significant risk to consider before you invest. This means that for every ten investors, one will end up losing out financially. Again, that loss could be just a few pennies or could leave you with almost no savings.
As an investor, it's best to hope that your investments will do well whilst preparing for the worst and accepting that you could be one of the unlucky 10%. Losses should be seen as part and parcel of investing, so make your investments along with the assumption that you're going to be losing money. Be sure that you can absorb any losses and don't need the money elsewhere; then anything you gain will be a happy bonus rather than something you need.
At some point, your Investment Bonds might mature, and you'll receive the money held within them. Hopefully, this is significantly more than you originally paid in.
Not all Investment Bonds mature. Many are offered as a whole-of-life product, so they'll simply maintain themselves until you choose to cash them in.
Investment Bonds are considered to be life insurance product. Many people never cash in their Investment Bonds, instead choosing to leave the money to someone else. This means that you might never find out the final return on your investments.
Unlike other life insurance policies, which usually pay out an agreed sum if you die during their term, Investment Bonds can be unpredictable. You can't be sure how much a loved one will be able to withdraw when they cash in, so you must be comfortable with some financial uncertainty.
It’s possible to find Investment Bonds with a guaranteed return. These aren’t common, so you’ll need to shop around.
Guaranteed returns can offer peace of mind but also have drawbacks of their own. Guaranteed returns are usually set at a cautiously low rate, so your money won’t grow beyond the agreed percentage even if your investments do well. Guaranteed returns could be as low as 1% per year, which is significantly lower than the average return if you’re willing to accept some risk.
If you really want your money to be protected, then Investment Bonds with guaranteed returns could be the product you choose. However, you might find that other savings accounts will actually offer better rates. Before committing to investing your money, look at the other available products like fixed-term savings accounts. Top accounts could offer as much as 1.25% interest on deposits.
It’s exceptionally rare to be able to claim that a guaranteed returns investment product was mis-sold to you because they should explain everything in full detail and make clear just how much you’re going to get.
The exception would be if any commission fees weren’t disclosed or were left vague. In those circumstances, you might be able to lodge a complaint and pursue compensation with the FOS. However, this will be limited to putting you back to the position you would’ve been in had it not been mis-sold – i.e. the undisclosed commission being returned to you.
Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for a mis-sold investment bonds and they can do the same for you.
Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.
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