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It can be difficult to know where to start when it comes to making investments. Investing can be a complex and risky enterprise. Spending the time to get it right is the first investment which will help you see returns on your money. Here are our top 10 investment advice tips for beginners.
1. Be consistent
Considered by some to be the golden rule of investing – investing is a marathon, not a sprint. It’s important that you invest on a regular basis and remain consistent and putting what you can afford to put away each month. This will help you build up a large pot over the long term that compounds through the peaks and troughs of the market.
2. Always invest in the long-term
Long-term investments are the best bet for seeing a return on your money. Market analysts agree that the key to successful investing is not timing the market, but time in the market.
Waiting for an opportune moment to jump into the market, before making a quick exit, is a significantly less reliable way of investing than making investments for the long term.
Because markets tend to outperform inflation over time, maintaining a long-term perspective will pay dividends. Although markets rise and fall, their overall trajectory over the past century has been upward, meaning that the short-term perspective is more often than not, the wrong one.
3. Diversify your portfolio
A diverse portfolio is integral to any strong investment strategy. When investors buy and sell across a range of financial products, they insulate themselves from the risk of any single stock crashing, with disastrous consequences for the investor’s holding.
If an investor goes all in on a particular stock or a small portfolio of similar stocks, they expose themselves to significant losses in the event those shares collapse in value. Buying stocks and shares in different industries and sectors minimises an investor’s exposure to risk and sees them well placed to benefit from steady market growth.
Most analysts agree that spreading your investments is the best way to capitalise on long-term market trends while protecting your portfolio from isolated downturns.
4. Have a clear goal in mind
Before starting your investing journey, you should be clear about what you want to achieve. That could be growing your disposable income, or building a fund for a long-term goal, such as retirement or education planning.
Knowing what you are setting out to achieve will help guide your investment decisions, and the amount of risk you are willing to onboard.
John Egan of Forbes says that “if you have more time for your investments to recover from a potential loss, you can invest more aggressively. If you might need funds immediately and can’t afford for your investments to lose money, you’ll need to be more conservative.
“The more time you have and the more aggressively you invest, the less you’ll have to invest.”
John Egan
5. Speak to a financial advisor
Before entering the stock market, it’s important to take expert advice. Investing is risky and can result in losing some or all of your money.
By taking expert advice from accredited professionals, you stand the best chance of developing an investment strategy which will minimise risk and maximise return on your investment.
The deVere Group offers wealth management advice across 100 countries and is one of the world’s leading financial advice firms. Our independent financial advisors can help you take the first steps toward investing. Professional support will give you the confidence needed to make informed investment decisions.
6. Make sure to be tax efficient
Tax-efficient investments will help you keep more of your money. There are several options to minimise your tax burden, from a shares ISA to a capital trust. In the UK, a personal ISA can hold £20,000 tax-free and can be used to hold stock.
Investors can also put their money into private pension schemes, where they will enjoy relief on the money paid into the scheme, and the ability to withdraw a lump sum, up to 25 per cent of the whole, without paying tax on the withdrawal.
Tax-efficient investments will help to beat inflation, allowing you to pocket more of your ROI. Always carry out due diligence with tax arrangements to ensure they are effective and compliant with relevant regulations.
7. Reinvest your dividends
Reinvesting your profits into shares will expand your portfolio and deliver compound returns over an extended period. When investing for the long-term, it becomes more important to develop holdings than to make a quick cash out.
“Dividend reinvestment has long been one of the great ways to build up a stock or mutual fund portfolio over time, and it works for exchange-traded funds (ETFs), as well. Reinvesting your dividends is almost always a good idea if you intend to hold your shares for the long term and don’t need the income now.”
Investopedia
8. Stay the course
Success when investing will come from maintaining a long-term perspective on the performance of your portfolio. If you have made investments as part of a plan for retirement or education – it might be tempting to cash out after a bumper period.
Likewise, turbulence in the market can see an investor sell off their shares, a move which could see them lose out on dividends for years to come.
Because the market trends upwards over time and typically outperforms inflation, a diverse portfolio should be able to navigate difficult market conditions and provide a steady income to the patient investor over time.
9. Do the homework
Investing is a risky enterprise that can result in the loss of invested money. Be sure to do your research before making an investment, and consult an accredited financial advisor for help.
“Throughout your life you’re likely to need different financial products. A financial adviser can help you make the right decision about the best product for you.”
MoneySuperMarket
While the advice isn’t free and DIY options are available if you’re looking at getting a complex product, even the most seasoned investors see the value in paying for an adviser to ensure they get it right.
10. Speak to an expert
The deVere group offers a range of financial planning and wealth management services, and their team of highly skilled advisors are well placed to be consulted about a move into the world of investing.
Providing a quality bespoke service, deVere financial advisors can tailor a plan that suits your needs. If you’d like to get in touch with a deVere advisor, click here.
