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What to consider before buying Legal and General shares
Investing in the stock market carries risk and losses could exceed your initial margin. To reduce the likelihood of this happening, it’s important to develop an investment plan before buying Legal and General stock. Here’s a few things to consider:
What are your financial goals?
Defining both your short and long-term goals can help inform important decisions such as the amount of money you’re looking to invest and how long you plan on holding any shares before selling them and potentially taking profit.
When will you need the money?
Investing in Legal and General shares offers the potential for significant capital growth as its stock price growth can provide higher returns that cash savings, which is limited by low interest rates.
To maximise any possible gains, it’s recommended that you hold Legal and General stock over an extended time period (over 10 years if possible), so it’s important to consider when you’ll need the money. If you anticipate that you’ll need access to these funds within the next few years, shorter term options like government bonds or high yield savings account may be a better option. If you’re still interested in investing, then it’s recommended you opt for lower risk, less volatile stocks.
Generally speaking, Legal and General shares are considered to be a medium risk investment. As with all stocks that have exposure to the financial services sector, Legal and General shares are heavily impacted by economic factors like interest rates and bond markets, so its stocks tend to be more volatile during periods of economic uncertainty.
Despite this, Legal and General is a well-established FTSE 100 firm with a consistently strong financial performance. This makes the stock much lower risk than other less mature financial companies.
How much risk can you tolerate?
Financial markets can be unpredictable and there’s always the possibility that you could lose more than your initial investment. To help minimise this risk, it’s essential to have a risk management strategy in place.
Here are some ways you could manage this risk:
- Invest in stocks from a range of sectors to diversity your portfolio
- Hold Legal and General shares for at least 10 years and look to build wealth over time
- Keep a close eye on economic developments and market trends that may affect Legal and General’s performance.
