Great, you have started investing! Getting started is often the hardest part – such as finding an investment platform, understanding the investing jargon and picking where you want your money to go.
Try not to let news headlines or opinions of others make you question your strategy or create fear. Remember you are investing for the long-term – so do not let short term fluctuation faze you and also remember that you should not overcomplicate what you are doing.
Investing should be pretty simple and once set up, take little time to do. So read on to find out ways to be the best investor you could be:
Keep it Simple
Not only will a simple investing strategy save you time and effort, it will also keep you interested in investing and not something that will ware off after a while.
A simple method to investing it :
- Picking ETF’s or index funds
- Investing Consistently
Look for globally diversified funds, or funds that track the stock market & invest on a regular basis, such as monthly. Some investing platforms allow you to set up automatic payments, which top up your account without you needing to!
Think long term
A long mindset is crucial when it comes to investing. You should be investing money that you will want to withdrawal in a minimum of 5 years, but ideally in a few decades time.
Set yourself financial goals – for the short, medium and long term and see how your investments align with these goals.
Do not wait for the stock market to go ‘down’
I have heard one too many people stay that they will start investing when the stock market falls. What I tell them that they should start as soon as they are ready, as time in the market is more important than timing in the market.
The longer your money is in the market, the more time compound interest has to work on your investments.
Also it is incredibly hard for people to predict the stock market to fall, if you think you have that kind of knowledge – do let me know! Continue to consistently invest in the stock market, no matter the price of it – as the stock market fluctuates all the time.
Investing in a tax-free account will allow you to reduce the amount of tax you will pay in the long-term. This is where a Stocks and Shares ISA will be useful – it is a £20,000 annual tax wrapper which is tax efficient – meaning you will not have to pay any capital gains nor dividends tax on the amount invested in it. If you invest outside of an ISA (in a General Investment Account) you will eventually have to pay tax when you meet the threshold.
Many investment platforms now offer Stocks and Shares ISA’s.
Investment platforms will charge you for using their platforms to invest on. An important aspect to consider when picking an investment platform are the fees associated with it – such as chargers to buy/sell funds or for them holding your money. In the longterm, when you have consistently stayed invested, fees will add up.
Take time to understand all fees involved, and compare a few platforms – not just the first one you have come across in your research.
Diversify your Investments
Rather than picking many single stock to try and diversify your investment portfolio, take a look at funds / ETFs which contain many single stocks. For example the ETF VWRL (Vanguard FTSE All-World) contains over 3,800 stocks spread over 50 countries. Not only is this much more simpler to handle, compared to picking many stocks but also risk is lowered, and you will be only impacted by normal stock market fluctuations.
Try not to overdiversify, or hold way to many funds, as you may lose track or spend way to much time / effort than you need to to keep on top of your investment portfolio.
A simple investment strategy – the better it is for you! Try not to overcomplicate things
Do not try to ‘Beat the Market’
Beating the market means wanting to get a better return than the stock market average by picking single stocks. My advice – do not try to do it, as very few people can actually do it. The time, effort and emotion you will have to deal with is far from worth it.
Therefore picking index funds and ETFs are the best options. They are a group of single stocks which track the stock market, meaning you are owning a piece of the stock market.
Moreover, you are investing for the longterm try not to sell your investments, even when the market falls – view this as an opportunity to buy more funds, but at a discount!
To summarise, you are investing for the long-term – so try not to let short term market fluctuations get to you. A simple and well researched strategy will work over the long-term & remember – do your research, stay consistent and try not to beat the market.