7 top tips to help you invest successfully

Glasses on a newspaper talking about Investing


Gareth Trainor

14th April 2017 at 6:27am

There are a few straightforward tips that can give your money the potential to grow over the long term, while also helping to manage risk.

If you’re new to investing, these may be a good place to start planning from. And even if you’ve been investing for many years, it’s worth revisiting the basics as it’s easy to lose track of investments in various pensions, ISAs and shareholdings.

1 Know why you’re investing

It may seem obvious, but before you commit any money to investing, you should clarify your goals and requirements. It’s worth reviewing these every few years as your circumstances may change.

Goals and requirements when investing

Doing a fact find, like the one from the Money Advice Service, can help you work out exactly what you want to achieve and how much money you can afford to commit to investing. There are also questionnaires to help you understand how you feel about risk in the context of investing.

2 Decide whether to DIY or to delegate

How you invest will depend on how much money, time and experience you have, as well as how much financial responsibility you feel comfortable taking on.

Our do-it-yourself or delegate guide can help you decide if you’re in a position to manage your own investments, or if it would suit you better to let investment professionals make the decisions and manage them for you.

3 Think long term and stay composed

It’s normal for markets and share prices to move up and down. But it’s easy to get caught up in the emotions of a short-term fall and think about selling your investments. However, if you do this, you may lock in your losses and miss out on a rebound.

Just like having negative equity in your home, falls in the value of investments are only a problem if you need to cash them in. If you can hold your investments over the long term you’re more likely to do well financially.

So try to avoid knee-jerk reactions especially when markets fall and remind yourself of the reasons you invested in the first place.

4 Small and simple is a good way to begin

Even if you invest a small amount regularly you can benefit from growth on growth – the effect of compounding. Over a few months or a year the effect may be small but over a longer period you can potentially build up the value of your investments significantly.

Always remember, though, that there are no guarantees and investments can fall as well as rise in value and of course past performance is not a reliable indicator of future performance.

5 Add more value by reinvesting income from dividends

If you’re investing direct in shares or bonds, you have the option to reinvest dividends or interest. Some funds also give you the option of either taking income or reinvesting it. If you don’t need to take an income, then reinvesting can add more value to your overall investments over the long term.

6 Avoid unnecessary risk by diversifying

Do you know what any pensions, ISAs, funds or shares you have actually invest in?

It’s important to know, as you could be exposed to unnecessary risk if you’re in too few types of investments. You might want to think about investing in a wide mix of investment types that don’t perform the same as each other to help balance risk and return. And the great news is that if you get it right you can achieve the average return of your investments but can take less than the average risk.

Proper diversification can be difficult for even the most experienced investors to achieve, so you may want to think about one of the many ready-made diversified funds available. These are run by dedicated teams of investment analysts and managers who have access to specialist tools to work out the best mix of investments to achieve a particular objective.

7 Keep up with the best thinking

You may have invested 10 or 15 years ago and at that time chosen the best investments available. But things have moved on with a much greater emphasis on investments designed to meet specific goals. For instance, many companies now offer ranges of funds that aim to carefully manage risk. These let you select a fund based on the level of risk you feel comfortable with.

If you’re new to investing, or haven’t reviewed your investments for a while, why not have a look at the newer options available or speak to a financial adviser about this.

In or near retirement? Managing risk is especially important if you’re planning to remain invested in retirement and take an income. In this situation, new and more complex risks are present so you may want to get advice to help you choose the most appropriate solutions.

These tips are meant as a helpful starting point or as a reminder for anyone investing. You can find more detail in other articles we’ve given links to.

This article and any responses to comments should not be regarded as financial advice.

The value of investments can go up or down and may be worth less than you paid in. Past performance is not a reliable indicator of future performance. Information correct in April 2017.