How to start investing?

Whatever stage of life you are at, you’ll have a dream.

Be it to buy a house, fund your children’s education or travel the world. Investing in a portfolio of stocks and shares can make your hard-earned cash work a bit harder and bring you closer to your goal.

To have the best likelihood of growing your assets it is advisable to invest for the long term. This helps your investments ride out periods when the stock market goes down as well as up. It also means you should only invest money you can reasonably afford to put aside and don’t need for everyday living. Of course, should your circumstances change you can, subject to stock market conditions, access your funds if needed.

When investing it’s important to be realistic about what your portfolio might be able to achieve. If you’re investing for the long term it’s often worth putting your growth expectations into context by comparing it to the rate you get at the bank. Currently, these rates are less than inflation, so technically you’re losing money by leaving it in the bank. Setting a goal to exceed inflation, after all costs, could be a good place to start.

It is worth noting that the earlier you start, the easier it should be to reach your target. A simple illustration demonstrates the importance of starting to invest at an early age:

investment illustration


So starting to invest as soon as you can could make a huge difference, but it’s important to remember that you might get back less than you started with as the value of investments go down as well as up.

Common investment mistakes:

  • Succumbing to the emotions of fear and greed

The value of stocks and shares can go up and down and often the natural human reaction to falling prices is to be fearful of further falls and sell. This means you might not be invested when and if the market recovers and could result in buying back in at the top. To counter this it’s worth planning to stay invested for the long term.

  • Putting all your eggs in one basket

Diversification is crucial and is the basis of portfolio management theory. Buying a mixture of asset classes can give you exposure to different aspects of the market as it’s difficult to predict which area will perform best in any given period.

  • Not using your tax free allowances

Each of us gets an annual tax free allowance to invest, via an Individual Savings Account or ISA. Not making use of this can erode your capital so it’s important to understand what is available to you.

Common misconceptions:

  • You need a lot of money to invest in the stockmarket

At JM Finn we offer a personalised service to all clients with investment levels starting at £20,000. This would give you access to an individual investment manager who would look to build a relationship with you over time and understand your investment requirements and, importantly ensure you have someone to talk to as and when your circumstances change.

  • To have someone do it on my behalf is prohibitively expensive

Investing in a multi-asset portfolio where the assets are pooled with those of other investors can be a cost-efficient method of putting your money to work in the stock market. Our unitised funds charge an annual fee of 1% of the value of your investments and the fees are built into the price of the funds to make it as easy as possible.

  • I’m better off investing in property

It is becoming less attractive for private investors to buy and own investment properties, as landlords feel the pinch from tax changes aimed at making properties more affordable for home owners. This is likely to be a long term trend and its worth remembering the additional hassle that goes with investing in property, such as maintenance and finding a tenant.

  • I’d rather invest myself than pay someone else to do it

Doing it yourself is often a cheaper option and there are many online tools today that make this easy. We see investing as a full time occupation, with all aspects of a portfolio needing to be reviewed on a regular basis. Coupled with the individual research of each and every holding, successful investing is often restricted to professionals rather than time-poor investors working hard on their careers, supporting their families or nurturing their passions.

  • Investing is complicated

It can be. That is why we continue to offer a personalised service when so many look to automate it. We believe that having someone at the end of the phone who knows you and your investment requirements is key to simplifying the whole experience.

  • Investing into a pension is too far away to think about

It may be, but the sooner you start investing the less you’ll have to put in to reach your goals. And remember, investing in a pension can be a tax efficient way of saving.

Lastly, if you’re going to inherit any wealth or assets, it’s worth getting to know how to manage them early. Talking to your parents and understanding what they plan to pass on to you can help avoid any unexpected financial concerns.

And if you are likely to inherit some assets its worth getting some experience in investing so that you are not thrown in at the deep end at an emotional time when investing is likely to be the last thing on your mind.

And please note the investments discussed may not be suitable for all investors. The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested.

Contact us to learn how we can help build the future you want to see.

Understanding Finance

Helping clients understand what we do is key to building relationships. To explain some of the industry jargon that creeps into our world, we’ve pulled together a section of our site to help.

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