I’m 35 and have been building up my savings in a Cash ISA for many years and now have about £150,000 in there. I have a good income and no mortgage – I paid it off when I inherited my parents’ estate – so I don’t have any real need for the cash in the immediate future. I’d like to have a go at trying to make a real gain with higher-risk investments and a friend has suggested a VCT. What do you think?

Richard Barker of Smith & Pinching responds:

I can appreciate that the idea of “winning big” with investments is an attractive one, but can I suggest that you take one step back before launching into a speculative campaign? At this point in your life, you have the perfect opportunity to do some proper financial planning to take you through your working life and beyond, so now is the right time to identify your investment goals and your priorities to make sure you have them covered first.

It may well be that a higher level of investment risk may be suitable for you. However, it usually makes sense to hold a diverse range of investments. While this diversification may temper returns, it is also likely to reduce the absolute risk of the investments. A high-risk strategy does mean, of course, that you could end up with less money than you started with – or even potentially lose the lot.

Venture Capital Trusts (VCTs) involve investing in companies that are at a point of growth – either start-up companies or those looking to move up a level. Clearly, these companies are at a point of great uncertainty and the risks are very real. VCTs are commonly held as part of a taxation reduction or deferral strategy rather than in isolation, but there is the potential to make significant gains if they do well.

Other similar arrangements are Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS). Along with VCTs, there are limits on how much you can invest in them and minimum terms that the investments can be held. Their suitability for you will depend on a number of factors: it’s absolutely critical to get independent advice before embarking on this type of high-risk investment.

Any opinions expressed do not constitute advice. The value of your investment can go down as well as up and you may get back less than the amount invested. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. VCTs, EISs and SEISs are high risk investments and there may be no market for the shares should you wish to dispose of them. You may lose your capital.

For more information, please visit www.smith-pinching.co.uk