A couple of things before you invest....

Justin Urquhart Stewart

You've got some money to invest - so where do you start?

Sit down and ask yourself some searching questions, says stockbroker Justin Urquhart Stewart.

Don't be fooled

Investing often seems a complicated business.

In fact, most investment is common sense, only made more complicated by manyof those investment companies trying to sell you products.

Remember two key things:

If it sounds too good to be true, it probably is.

And if it can't be explained to you in an understandable way, that's because it's probably not understandable.

Before investing it is important to decide exactly what you want to achieve from your investment and how best to do that.

When doing this you should remember what I call the four Rs:

Returns

What do you want to achieve with your investment and what are your goals?

It may be capital growth, income or even a short-term flutter.

Most investors need to build for long-term growth, but as we get older, we look for a greater proportion of income with capital security.

On top of this you can mix and match. There is no reason why you cannot have a small proportion for potentially higher return and higher risk investments as a hobby.

But its size must be carefully considered when looking at your overall goal that you want to achieve.

Risk

The balance is clear - the higher the risk, then the greater chance of reward; the lower the risk, the lower the expectation of reward.

The measure to me is being able to sleep at night. I need most of my investments securely moving towards my long-term goals.

However, I am willing to tolerate a higher level of risk on a much smaller value so that I can have the opportunity of exciting gains.

How do you measure the level of risk thatis acceptable to you?

To me it is whether I would accept the risk of (albeit most reluctantly) losing it! But it is a matter of personal choice.

Research

The good news is that we have never had so much choice when it comes to investment.

The bad news is that we have never had so much choice!

For this reason careful research is more valuable than ever. But be wary of tips and short-term punts.

The measure to me is being able to sleep at night. I need most of my investments securely moving towards my long-term goals

Justin Urquhart Stewart,
Stockbroker

Whether in a fund or a company, look for consistency in their behaviour and track record.

In a fund you can see how they have performed over the years. With a company you can see the company reports - especially last year's - to see if they really did achieve what they said they would.

Rules

To maximise your chance of reaching your goals there are in my view some clear investment rules.

Why are you investing in this?

What do you want it to achieve? If it is a long-term investment then leave it alone but check it from time to time.

If it has a short-term goal then set it - once it achieves that then you can re-evaluate.

Always set a stop loss on an investment.

If it is going wrong (the percentage of the stop loss depends of the investment) and has dropped by say 20% then you sell. That way you know your losses cannot get any worse.

Most of us sell out our gains and end up holding on to our losses. Let your gains grow and harvest them from time to time.

But if it is going wrong then cut it - you can always buy it back later if you want to.

There are many other things to consider but these should set you on the right track.

Good luck and good hunting!

The opinions expressed are Justin's, not the programme's, and are intended for guidance only. Always seek professional advice for your own particular situation.