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Investing opens the door to a whole new world of opportunities and possibilities. Not only can you achieve your financial goals, but you can also support the companies you love and help them to grow. Your money is powerful, and what you chose to do with it matters. Along the way there are lots of decisions to make and things to consider. So, whether you’re just starting out, or are already an experienced investor, here are 11 vital dos and don’ts to help you on your journey.

1. DO have an investment goal

Maybe you’d like to buy a gorgeous property. Or to travel the world in style. Perhaps you’d simply like to retire with a comfortable income. Or take a few years out in sunny Spain to write a book. The first step to investing is figuring out what you want to achieve.

Once you find your dream, pop a price tag on it. That’s your investment goal. It’s what you’re striving towards.

Not only does this give you a clear vision, but it also helps to keep you motivated. Some people like to dot pictures of their dream around the house and workspace, we’ll leave that choice up to you!

For inspiration, here are some of the most popular ambitions and their average upfront cost:

Goal vs Average Price Tag Buy a property in the UK - £267,000 [1] Travel the world for a year - £18,000 [2] Buy a holiday villa in Spain - £199,047 [3] Retire with an income of - £25,000 each year (incl. Full State Pension) £262,000 [4] Retire with an income of - £40,000 each year (incl. Full State Pension) £718,300 [5]

2. DO work out how much time you have

As a guideline, the more time you have, the more equity (shares of companies) you should include. So, if your goal is more than ten years away, a higher proportion of stocks and shares in your portfolio is probably better. If you’ll need the money within in the next five to ten years, it’s normally best to have a balanced mix of equity, debt, cash and property. And if you’re planning to use the money within the next five years, you probably shouldn’t invest it in equity or debt at all. In this case, it might be better to go for a Cash ISA (individual savings account), Lifetime Cash ISA, or if you’re really good - even an easy-to-flip property.

3. DO keep some cash aside

Having cash is a vital part of any investment portfolio. It means you can react quickly if you see an opportunity you love. And more importantly, if you need to access some funds, you won’t be forced to sell your investments. Most investment portfolios contain around 5% cash.

4. DO make use of free investment calculators

Here’s a secret from me to you. I never dust down my old school calculator and do the maths manually. I always use a free online investment calculator to help me figure out how much money I need to put away each month. There are many out there, but my personal favourite is Wealthify’s investment calculator. You just enter how much money you want to contribute each month, your timeline and risk level, then the algorithm does the rest. In just a few seconds, you’ll have a super clear view on how much money you could expect to have in your investment pot.

5. DO start as early as you can

You may think that this is about forming good habits early on, but it’s more than that. Because the money you invest earlier grows more than the money you invest later. In an economic miracle, known as Compounding Returns – a concept which Albert Einstein famously described as the “eighth wonder of the world” – money invested earlier snowballs dramatically over time. The investments pick up profits and become bigger. Then the bigger investment picks up bigger profits and becomes bigger. This goes on continuously for decades, until you have a much bigger pot of money than you started with. It’s the magic of investing!

6. DO factor in your tax perks

Depending on your goal and timeline, you can boost your investment pot with added tax perks. You can do this with the platform you chose to invest with. For people based in the UK, there are two main options: · Self-Invested Personal Pension (SIPP) · Stocks and Shares ISA On the face of it, a SIPP has more benefits. You’ll get tax perks on up to £40,000 you put in each year. And best of all, you get your income tax back for any contributions you make. So, if you’re a higher or additional earner, that’s up to 45% extra money in your pension pot. But there’s a catch. You can’t withdraw from it until you are 55 years old, and this age will increase over time. Plus you can’t take it all out in one go without some hefty fines. With the Stocks and Shares ISA, you can withdraw your money whenever you like. And you can take out as much as you like. You’ll benefit from zero capital gains or income tax on up to £20,000 each year. But you won’t get income tax top-ups, so you’ll have to put in more of your own money to reach your goal. In most countries across the world, there are similar government schemes. Explore your options to make sure you’re not missing out.

7. DON’T take risks you’re not comfortable with

Guidelines are here to help, but at the end of the day, you need to do what’s right for you. Don’t take risks which you are not comfortable with. It’s not worth losing sleep over.

8. DO get a professional opinion

This is your dream we’re talking about. It’s your money. You need to get it right. Many financial services such as Hargreaves Lansdown, offer an initial conversation for free. Consider double-checking your strategy with an expert before you begin. After all, the best financial advisers pay for themselves. You have little to lose, but a potentially a lot to gain.

9. DO invest little and often

The technical term for this is ‘pound-cost averaging’, and it makes an extraordinary difference to reaching your goal. Let’s say that you invest £250 every month in a balanced portfolio, after ten years of normal market conditions you would expect to have £35,112 in your investment pot. That’s incredible really, isn’t it? You could travel the world for a year and have £17,112 left over. Sorted!

10. DON’T put all your eggs in one basket

We’ve all heard the horror stories. Don’t even go there. Never put all your money into just one or two investments. It’s way too risky. Most experts recommend that you should do the exact opposite. Diversify your investment portfolio so that you have a good mix of different assets, asset classes, industries, and geographies. For example, this could mean investing in a range government bonds from each of the continents as well as a wide spread of companies spanning many industries. Scatter your investments far and wide to make sure that they are independent from market risks. You don’t want one streak of bad luck to bring them all down together. Avoid the domino effect as much as possible when picking your investments. TOP TIP: A good way to diversify is by buying shares in funds such as ETFs. You’ll can get between 15 and 500 companies in a single share, so it’s normally great value for money too.

11. Don’t fall for greenwashing

Boohoo, Volkswagen, BP, H&M … What do these brands have in common? Well, they are all companies who claimed to be helping the planet but were caught red-handed doing the opposite. These brands even featured on prominent sustainable and ESG (Environmental, Sustainable, Governance) funds, benefitting from investment money which should have gone to genuinely ethical companies. This practice, known as greenwashing, has been listed as the single biggest obstacle to achieving our net-zero carbon emission goals. To help prevent the planet from overheating, triggering an irreversible chain of catastrophic events, the OECD state that $6.9 trillion must be invested in sustainability each year. This is far more money than governments can contribute on their own. And so, our investments are critical. If you want to invest for the planet, be sure to double check your fund holdings and assets, don’t fall for companies who are greenwashing.

[1] Source: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/january2021 [1] Source: https://www.indietraveller.co/1-year-travel-cost/ [1] Source: https://www.lainformacion.com/economia-negocios-y-finanzas/comprar-casa-barata-hipoteca-playa-ciudades/2812846/ [1] Source: https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p [1] https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p

Disclaimer

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