Taking the first step – Investing for beginners

Investing for beginners with Fairstone adviser, Michael Aremu.

Embarking on the journey of investing can seem intimidating initially, but with a long-term perspective, it can significantly accelerate the achievement of your financial goals.

It’s normal to feel a mix of excitement and apprehension as a first-time investor. There’s a lot to navigate – stocks, bonds, mutual funds, market trends and a sea of unfamiliar jargon. Remember, every successful investor started right where you are now.

The stock market is known for its fluctuations, with dips and rises being part and parcel of the game. However, history evidences that shares often outperform cash over extended periods and stay ahead of inflation.

Here are five essential tips to help you take the first step and beyond.

1) Aim high, aim right

The first step of your investment journey involves setting concrete goals. A relatively long-term target helps your investments weather market volatility. Your goal could be anything from saving for retirement to securing your children’s future.

During temporary market downturns, keeping your eyes on the prize reduces the likelihood of selling out and incurring losses.

2) Consistent investments: The key to stability

Contrary to popular belief, you don’t need a mountain of money to begin investing. Regularly investing manageable amounts each month or gradually investing a lump sum can prove beneficial, especially during times of economic uncertainty and stock market turmoil.

Your money purchases more shares when the market is down and fewer when it’s up. This strategy averages out your investment cost and may contribute to smoother portfolio performance over time.

3) Maximise your tax allowances

Remember your Individual Savings Account (ISA) allowance, which resets annually on 6 April. For the current 2023/24 tax year, this is £20,000. An ISA allows your investments to grow tax-efficiently, enabling more of your money to contribute towards your future.

4) Emotional intelligence in investing

Allowing emotions to guide your investment decisions is not a wise strategy. It’s natural to feel nervous when the stock market dips, especially for novice investors. However, maintaining your composure and staying in the market once you’ve entered can be crucial.

5) The art of diversification

A well-rounded investment portfolio will typically include a mix of equities, bonds and cash. Diversification is beneficial, as different assets react differently under varying market conditions. This can help balance returns and lessen the impact of a specific asset’s value decline.

For beginners, diversification can be a challenging task. That’s where expert professional financial advice is crucial. We can help you distribute your money across various investments tailored to your unique needs and risk tolerance. We can also ensure you’re making the most of your tax allowances and reliefs, giving you confidence that your money is working as hard as it should.

Kick start your financial journey?

Ready to embark on your journey to financial growth? Get in touch today.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.