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If you are considering investing for the first time, it’s important to recognise that market falls are a natural part of investing.

Article by Paddy Denning

Investing for the first time – seven tips to get you started

In this article, we offer tips and insights for those who are investing for the first time. If your goal is to ensure that your savings can effectively outpace inflation, you’ll probably need to seek out sound investment opportunities for your hard-earned money. However, with the overwhelming surge of TikTok advice, YouTube gurus, and DIY forex courses, it can be challenging to determine the right place to begin your investment journey.

1. Figure out your investment objectives

Before making your first investment, take a moment to ask yourself why you’re considering making this financial move. Your reasons could range from seeking to preserve your money’s value against inflation, preparing for retirement, or even planning for future school fees. Understanding your underlying motives will help you make more informed and tailored investment decisions.

Of course, you can research your options and make investments yourself, or you could consider using a specialist investment management service.

2. What’s your ‘why’?

If you are investing for the first time, you should first determine your ‘why’ as this will help gauge whether you should invest, sometimes clients would like investment advice on a large windfall they have received. It then transpires that they want to use it to purchase a home within the next year or so.

If you find yourself in this situation, it would be prudent to consider keeping your money in cash or fixed deposits. By doing so, you can mitigate potential losses in case the markets experience a downturn.

For instance, if your £100,000 investment dwindles to £90,000 right before you intend to purchase a home, it can be a distressing setback to handle. Allowing yourself sufficient time before needing to access your funds gives your portfolio the opportunity to recover from any unfavorable market conditions.

3. Decide which investment vehicle you wish to use

The significance of this decision lies in the fact that although a pension might offer enticing tax relief percentages of 20%, 40%, or even 45%, it may not be the ideal option if you’re investing for a goal that’s just 10 years away and you’re currently 32 years old.

In such a scenario, you won’t be able to access the money in your pension for another 25 years until retirement. However, if you require the flexibility of accessing your funds before retirement, a Stocks & Shares ISA is likely to be the more suitable and advantageous 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.

Furthermore, you could also consider the Lifetime ISA as it has many benefits and tax advantages. Of course, this isn’t financial advice, however, a mere suggestion for when you are researching your options.

4. Be prepared to see the value fluctuate

Let’s be clear, we’re not suggesting that you intentionally invest in anything that will cause you to lose money. However, if you’re contemplating your first investment, it’s crucial to understand that market downturns are a normal aspect of investing.

The value of markets may experience temporary fluctuations, and it’s essential to be mentally prepared to endure these fluctuations and ride out any storms that come your way.

Related reading: Navigating a down market | Vanguard

5. It’s about time in the market, not timing the market

This well-known financial saying emphasises that success through investing is a long-term game. It’s more about staying invested and spending time in the market and less about attempting to time the market.

Long-term commitment and patience tend to yield better results, over time.

6. Remember to diversify your investments

In recent years, some individuals have achieved sudden and remarkable wealth by fully embracing meme stocks, cryptocurrencies, and other high-risk investment tactics.

However, amidst the winners, a significantly larger number of people have suffered losses amounting to thousands. Diversifying investments helps avoid dependence on a single asset, company, or geographic location, safeguarding one’s fortunes.

7. Decide how much risk you want to take with your investments

In the main, there are two aspects to investment risk, your capacity for loss, which is an objective measure, i.e. how much could your investment fluctuate without it affecting your lifestyle.

Another crucial aspect is your attitude towards risk, which is subjective. It involves determining the extent of a potential investment downturn that you can tolerate before deciding to exit.

Identifying both risk tolerance and investment goals is vital, and seeking guidance from an independent financial adviser can assist in formulating the most suitable strategy, considering all these factors.

If you are new to the world of investment risk, watch our Youtube explainer video, below.

Investing for the first time  – article summary

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 you take before you invest.

We’d always strongly recommend you ensure that any investment you consider is FCA regulated and don’t fall for some of the commonly touted scams. ScamSmart – Avoid investment and pension scams | FCA

If you would like to discuss any of the above with a local independent financial adviser in Rayleigh, then please get in touch. Not local? We’re always happy to meet via video conferencing.

About the author – Paddy Denning FPFS

Paddy is a Chartered financial planner and a Fellow of the Personal Finance Society. He offers financial advice in Rayleigh, Essex, and serves clients in the City of London. You can follow Paddy on LinkedIn and if you would like to discuss your savings, pensions, and investments, call him today on 01268 944122.

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