3 minute read
Financial Matters
from SE23 December 2022
by SE Magazines
With Akwasi Duodu | akwasi@sterlingandlaw.com | www.sterlingandlaw.com
Investing For The First Time
If you’d like your savings to have the best chance of beating inflation, you’ll likely need to find a good investment for your hard-earned cash. With the huge rise in TikTok advice, YouTube gurus and DIY forex courses, it can be difficult to know where to start.
1) Figure out your investment objectives
If you are considering investing for the first time, first ask yourself why you are considering making this investment. It may initially be to ensure your money keeps pace with inflation or for retirement. You may even be investing to cover future school fees. You should first determine your why. This will help gauge whether you should invest. For example, some may wish to invest a windfall they have received but want to use it to purchase a home within the next year or so. If this is you, it may be better to keep the money in cash or a deposit account because if markets did fall, you’d have little time to recover any losses. If your £100,000 turns into £90,000 just before you need to buy a home, that’s going to be a painful loss to stomach. Allowing yourself adequate time before you need to access your money will allow time for the portfolio recover.
2) Decide which investment vehicle you wish to use
This is important because whilst a pension might provide, 20%, 40% or even 45% tax relief, if you are investing for a goal in 10 years’ time and you’re 32, you won’t be able to touch that money for 25 years! If you need the money before retirement, a Stocks & Shares ISA may be a better choice. In the 2022/23 tax year you can invest up to £20,000 into a Stocks & Shares ISA. If you have invested in a cash ISA in previous years you can transfer this over to a Stocks & Shares ISA.
3) Be prepared to see the value fluctuate
We’re not saying that you should invest into anything that is going to purposefully lose you money. Quite the contrary. If, however you are considering investing for the first time, it’s important to recognise that market falls are a natural part of investing. There will be times when the market fluctuates in value, and you’ll need to be prepared to weather these storms.
4) Remember to diversify your investments
The last few years have seen a few individuals make money almost overnight by going “all in” on meme stocks, crypto and other high risk investments. Whilst there have been winners, there are also a much larger number of individuals we never hear about who have lost thousands in the process. Diversifying your investments means your fortunes are not tied to one asset, company or geographical location.
5) Decide how much risk you want to take with your investment
It’s important to identify how much risk you’re willing to take. This is where an independent financial adviser could help you formulate the most appropriate strategy. There you have it, five steps to consider when investing for the first time. If you have never invested before, it can be daunting, we’d recommended ensuring you are fully aware of the risks before you invest. We’d always strongly recommend you ensure that any investment you consider is FCA regulated. Better still, get advice from a regulated firm of financial advisers.
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