Five tell-tale signs that investing money is not for you

As many as 2.9million households in the UK are investing when they should not be, according to investment platform Hargreaves Lansdown.

Although investing is one of the best ways to grow your wealth over the long term, you are generally only considered to be in a position to do so if you have savings, your debts are not a burden and you are not in arrears, it says.

Here are some tell-tale signs that you are NOT ready to invest.

You don’t have a rainy day fund

Aim to have at least three months of outgoings in an easy-access account for an emergency and more if you are self-employed or retired.

A regular saver account is a great way to get started, allowing you to save a set amount each month and get a higher interest rate. For example, First Direct pays 7 per cent on up to £300 a month.

You have debt

Interest rates^[1] on short-term debt, such as a loan or credit card, are higher than the return you are likely to achieve on investments, so paying these off should be a priority.

Struggling: As many as 2.9million households in the UK are investing when they should not be

Set up a direct debit to clear your credit card in full each month if you can afford to, or at least make sure to make more than the minimum repayment. A 0 per cent credit card can give you time to clear the debt.

You need the money soon

Investing should typically be for a minimum of five years as this gives time to ride out ups and downs in the stock market.

Anyone hoping to get rich quick, or who may need access to their cash sooner, should think again.

For those with short-term goals, fixed rate savings accounts that offer a guaranteed return are generally a better option.

You are having sleepless nights

Investing should not keep you awake at night. Even if you have enough cash to invest, it still may not be right for you, says Marianna Hunt from Fidelity International. ‘If you’re the kind of person that will panic and sell your investments as soon as they start to dip, then investing is unlikely to be a good option,’ she says.

You haven’t done your research

You don’t need to be an expert but you should do some homework before committing any money. Ask yourself why you are choosing an investment. Is it because you have seen it on social media or because it suits your risk appetite and has a strong track record?