Before choosing your investments, think about the amount of time you can leave your money in the market.

Shares offer the greatest chance for growth in the long term. However, if you only have a few months to invest, their volatility could leave you with losses. That is why you should always estimate when you might need your money again and invest accordingly.

Always remember that the value of investments can fall as well as rise and you may get back less than you initially invested even in the long term.

If you are unsure about investing you should seek independent advice.

Short-term approaches

If you only have a few years – or a few months – before you will need to pull your money out from the markets, you may want to look for low-risk, low-volatility investments.

A good short-term portfolio may include high exposure to bonds, as well as cash or cash-like investments. Some investors may also want to include some holdings in lower-risk shares from well-established companies. This kind of portfolio tends to be used by people who are close to retirement or close to the end of their investment term.

Looking at the medium term

With five or more years, you can start looking at a more traditional portfolio, with a diverse mix of equity balanced with some holdings in bonds and cash. This is because in a typical economic cycle, five years is enough to recover from any significant downturns. However, this is not guaranteed. Volatility in recent years has had a significant impact on these funds.

Long-term investing

Younger investors saving up for retirement may find that they have 10 to 20 years or more before they will need to start drawing down money from their investments.

With the luxury of time, you may want to consider riskier and more volatile investments. While there are no guarantees, by taking on greater risk, you may earn a higher return. Such a portfolio may tend to be very volatile and should only be used for a small portion of your investment. A downturn can hurt your portfolio, but you would be able to afford the wait for the eventual recovery. Then, as you approach retirement, you can slowly transition to safer investments in order to protect your gains. Too much high risk can seriously impact your fund value.