Investing basics
Chances are you already know what investing is, but just in case, we’ll tell you what investing is and then explain how you can do it.
Investing for the first time can be daunting, but here are five simple investment rules to get you started.
Having three months of emergency cash means being able to carry on meeting your expenditure if your main source of income disappears. It’s almost universally used as a benchmark by financial planners. The important thing is to allow you to carry on and not force you to sell off your investments or dip into your savings.
One of the questions we’re often asked, is how much should I save? Well, there’s no hard and fast rule because saving is a personal thing. You need to do what suits your own scenario, as we go through our own investment journey due to timing and allocating your savings towards your savings goals. It is a great step to get started towards growing your financial freedom.
Investing for the first time can be daunting, but there are five simple investment rules to get you started.
No one can predict the future but here is some advice to reduce your risk when picking stocks.
Your investments could be doing very well, but if the cost of managing those investments is high, then it reduces the long-term returns. It pays to pay attention.
Investing in stocks and bonds comes with risk. It’s good to have a diversified portfolio which is the same as saying ‘don’t put all your eggs in one basket’.
Emotion is the enemy of investment and history has shown that trying to time the market usually leads to worse returns. Don’t listen to commentators telling you to buy or sell, have the conviction to stick to your long-term plan.
MAKING your money work hard by investing in the stock market is a smart move for long-term savings. Here are six tricks of the trade that will help maximise your returns:
The difference between your average household myth and investing myths is that believing in the latter could end up costing you money.
Some might think that a night at the poker tables is the same as building wealth through investments, but investing and gambling are very different. This little video explains why.
I’m not going to talk about the Financial Conduct Authority or HMRC rules, but the far more useful investment-based rules of thumb that we can use to help us plan and track progress.
If you win the lottery (more probably you’ll get a bonus or an inheritance) win it then one it. If you happen to have been particularly jammy, use 1% to indulge yourself now.
Managing investments
The 100 minus your age rule is another asset allocation rule— 100 minus your age gives you the percentage in equities with the balance going into low-risk bond assets.
This tells you how long it will take for your money to double. Divide 72 by the interest rate or rate of return you are using or earning, and it gives you the number of years it will take for your money to double in value.
This is the expected long-term return from equities, bonds and cash. It can be combined with the rule of 72 so you can see how long it takes for each asset class to approximately double in value.
Now when did you last check your portfolio? I mean properly. Here’s another rule to try: think of your intended retirement age, double it, add sixty, divide the answer in half, and subtract the number you initially thought of. The answer is thirty which is the number of minutes needed to check your portfolio.
This is the manageable number of funds in your portfolio. If the number of funds is greater than 18 then it can get difficult for an investor to keep track of what’s going on — professional portfolio managers tend to run at about 50 fund holdings but are on the case 24/7 and have a supporting team. Another problem in holding too many funds is that overlap can occur.
Long-term investing doesn’t mean sitting back and doing absolutely nothing until you need to call on your money. Reviewing your portfolio is an important component of being a DIY investor.
Investment platforms
Find out what a platform is and what the differences between platforms are.
Investment Platforms act as a place to buy, sell and hold all your investments, but don’t be fooled into thinking they’re all the same. Different investment platforms offer different services, have separate charging structures, and as a result, matchmaking the right one for an investor can be tricky without help. Here are five things you need to consider when choosing your platform.
Nowadays most investors buy, sell and hold funds through platforms. These are websites where you can access different companies’ funds and other types of investments and set up Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (Sipps) and then to monitor all your holdings going forward in one place.