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Chartered Financial Planner’s top 10 tips for investing success

Chartered Financial Planner, Bradley Clark shares ten of the most important tips he’s passed on during his ten years at HL.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This summer marks my tenth anniversary working at HL. I’ve spent around five years speaking with clients on our Investment Helpdesk, and five years advising clients as a Chartered Financial Planner.

I’ve spoken with thousands of clients, answering a huge number of questions on one key topic – investing.

This got me thinking. If I could go back to the start, what tips would I give myself?

So here are 10 things I’ve learned from my 10 years working for HL.

This article and our tools aren’t personal advice. If you’re not sure whether an investment is right for you please ask for advice. If you choose to invest, the value of your investment will rise and fall, so you could get back less than you put in.

Tip 1 – Start sooner rather than later

The sooner you start investing, the greater the chance of success. You can start investing from just £25 per month. It might not seem a lot, but if you saved £25 per month from age 20 until 65 and achieved 5% growth each year (after charges), you'd have over £49,000.

But if you start at 30 you'd save £27,800 – a difference of £21,200.

Tip 2 - Invest regularly

It’s good to get into the habit of investing each month.

Investing regularly into a volatile market could mean the average price you pay for your investments ends up being lower than a single lump sum investment. Investors average out the price of buying investments and benefit from ‘pound cost averaging’.

Investing when markets have fallen means your money buys more units or shares. Though remember if the market rises above the original price, the same amount will buy you less.

Tip 3 – Diversification is key

I used to invest directly in shares. Some performed well, a lot didn't. No matter how much you think you know investing directly into shares is very risky. If that company gets into difficulties then you could lose some or all of your money.

You can spread your risk by diversifying your investments. Funds are made up of lots of different investments, so can be a great and easy way to spread your money. Even so, it’s wise to invest in a range of funds to diversify further.

Find out more about diversification

Tip 4 - Don’t hold too much cash if you’re investing for the long term

Whether it's Brexit, trade wars or coronavirus, there’s always something going on in the world that could cause market volatility.

Every day your money isn’t invested or in a savings account with a good interest rate, the more the value of your cash is likely to be reduced by inflation – the general rise in prices.

If you want to invest for five years or more and can tolerate the added risk, we think you should consider getting your money working harder by investing it in the stock market.

Remember, unlike the security offered by cash, other investments can go up and down in value. So you could get back less than you invest. Although you shouldn’t hold too much cash, it’s sensible to keep three to six months’ worth of living expenses in easy access accounts for emergencies.

Tip 5 - Don’t tinker too much

It's important to keep an eye on your investments now and again, but the key thing is to give them time. Once you’ve created a portfolio that’s right for you, check it every so often. You might only need to make changes when your circumstances or objectives change.

Try not to make knee jerk reactions if the market or a particular fund takes a dip. It may be temporary and may not affect you as much as you think if your goals are long term.

Tip 6 – Go global

For the majority of investors it’s a good idea to have a mixture of investments from around the world.

The returns of different stock markets can vary a lot. Working out which market will perform best in any given year is almost impossible. Having investments in most areas removes the need to predict – or guess – which area will outperform.

Tip 7 - Maximise your employer pension scheme

Auto-enrolment means that for a lot of people employers have to enrol employees into a pension and make minimum contributions. But lots of employers will go further than the minimum and, up to a point, 'match' any extra you put in.

Remember you’ll usually need to be at least 55 (rising to 57 from 2028) before you can take out of the money in your pension. All investments can rise and fall in value, so although there is the potential for growth in a SIPP, you could also get back less than you invest. Pension and tax rules can change and tax relief depends on your circumstances. If you’re not sure which investments are right for you, please ask us about financial advice.

Tip 8 – Have an emergency cash reserve

Recent events have highlighted the importance of having a cash reserve or ‘rainy day fund’ in place. An emergency pot could shelter you from unexpected events like a broken boiler or unexpected car repairs. Putting money aside for things like this gives you breathing room.

We typically recommend that you hold three to six months’ worth of living expenses in an easy access cash account. If you’re retired, your buffer should be greater because it can take longer to replenish your cash reserve if you have to dip into it.

Tip 9 - Keep an eye on your spending

It’s natural to want to spend your hard earned cash on the things you love. But if you’re keeping one eye on the future, you may have to curb your expenditure on luxury items. That’s easier said than done though, so take the time to work out how much you want to save, for what purpose and over how long, then see what you might need to cut back on to achieve that.

Use our budget calculator to compare your income to expenditure and find out how much you can save.

Try our budget calculator

Tip 10 - Don’t try to time the market

It can be very tempting to try and second guess the market, especially during periods of volatility. But to successfully time the market, you have to get it right twice.

First you have to know when to sell. Assuming you get that right, you then have to know when to buy back again.

We think it’s the time spent in the market that matters most.

Talk it through with the experts

If you think advice could help you on your investment journey, start by booking a call with our advisory helpdesk. It’s important you speak to them before speaking to an adviser so that you can make sure our service is right for you and that your questions can’t be answered using our free information.

Our helpdesk won't provide you with personal advice on the call but they’ll talk you through the services we offer as well as the cost. If you decide to go ahead with advice, they’ll then put you in touch with an adviser within two working days.

There's no obligation to take advice at this stage, but if you do, there will be a charge which we'll explain on the call. If our advisory service isn't for you, we'll offer further information to help you make decisions for yourself – it's your call.

Book your call

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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