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You’ve got onto the property ladder, have an NHS pension scheme, built up some cash savings and protected yourself and family with insurance. Where next? Whether you’re looking to invest for your children’s education, fund a large purchase of simply build a comfortable nest egg and inheritance, investments may be your next step.

7 top tips for investing

1 – Set long-term goals.

Why are you investing? Stock markets are not the place for short term savings. Stock markets move down as well as up but over the long-term, you can make far greater gains than you would in the bank. Most investment advisers should recommend at least a 5 year investment time horizon, if not longer. This provides enough time for your investments to overcome short term volatility in stock markets.

2 – Leave your emotions at the door!

Warren Buffett (one the greatest investors of all time) once said “Stock Markets are a place where patient people take money from inpatient people”. As above, stock markets can be volatile. If you panic every time your investments move down a little, you will get nowhere.

Let’s just take a look at the top two. Unless you’ve been living under a rock for the last few years, you may have noticed some tensions between a US president and China, some financial issues with Italy and a little ‘B’ word happening (or not happening) in the UK. These geopolitical issues cause volatility in stock markets which escalated in late 2018. Many people panicked at this point with stock markets falling off significantly in October & December 2018 and many pulled their money from investments. Unfortunately for them in January 2019, stock markets had their best January performance in more than 30 years.

3 – Get the right advice

Speak to experts, such as Independent Financial Advisers and leave investing up to them, unless you have done extensive research yourself. IFA’s can use the entire market of investment managers and many investment managers only accessible through IFA’s to ensure your funds are looked after a grow in the right way.

4 – Understand your risk tolerance

This is individual and affected by many factors such as education, income and wealth. As one gets older, risk tolerance tends to decrease. There is not one ‘correct’ risk tolerance. Investment advisers may ask you to complete a short questionnaire to understand your risk tolerance further. As you gain more knowledge of investments over time, your attitude towards risk may increase as you realise there is less risk as previously perceived. In general, if your investments are keeping you awake at night then you’re probably taking too much risk!

5 – Use all tax efficient options available

Starting with the very basic, Individual Savings Account (ISA). A stocks and shares ISA allows you to invest £20,000 every tax year with no tax to pay on income or Capital Gains. Outside of this, maximising Capital Gains allowances can bypass some tax as well.

6 – Diversification (Don’t invest all your eggs in one basket) –

Shares are one type of investment and these can be split into many other asset classes. For example, one fund could invest in smaller companies in the US. There are thousands of funds on the investment market. A well-constructed investment portfolio will include shares in companies all around the world in various sectors. Portfolios will also normally include other assets such as Fixed Interest, Property, Commodities, Infrastructure, Cash and more.

7 – Regulation and protection(the boring but very important part!)

Long-term investing is not sexy. It’s not supposed to be. Long-term investments are boring and that’s exactly what you need for steady long-term growth. Investing through a regulated IFA ensures your investments are given an added level of protection. Check the Financial Conduct Authority (FCA) register to ensure your investment adviser is regulated. Importantly, check the investments being recommended are also FCA regulated, which normally gives you protection under the Financial Services Compensation Scheme (FSCS). Unregulated investments will try to sound thrilling and exciting, to entice you in. But remember, you are given little protection should things go wrong. If it sounds too good to be true, it probably is…

 

IEP Financial Limited are authorised and regulated by the Financial Conduct Authority. This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.