How to invest - tips for successful saving
Here are some useful tips to help you become a more successful investor.
1. Do your sums
Work out how much you can afford to invest as a lump sum, regular payments or both. You should never risk money you might need for an emergency or can't afford to lose.
2. Consider investing on a regular basis
This can help to smooth stock market ups and downs and help you avoid investing all of your money when the market is at a peak. Your regular contribution should buy more shares or units when the market and prices are low, and fewer when prices are high.
3. Decide what type of return you want
Work out how long you want to invest for and decided whether you want - growth, the ability to withdraw any returns, or a combination of the two.
4. Think carefully about what level of risk you're comfortable with
We're all different and our personal attitude to risk can change with our circumstances and age. The nearer you get to retirement, the more cautious you're likely to become and the keener you're likely to be to protect the fund you have already built.
Note that the value of your fund may fluctuate and you may not get back your original investment.
5. Consider limiting your exposure to risk
Think about spreading your money across different kinds of investment to suit your attitude to risk. You can use the investment pyramid to help you decide what makes sense for you.
6. Check the small print - these are important notes
Make sure you're clear about any product charges, conditions and penalties - and any tax implications of the savings and investments you're making.
7. Understand third party fees
If you're investing through a financial adviser, find out how much you'll be charged for advice (whether fees or commission or both).
8. Do your homework
If you're investing in a fund, check the financial press and financial websites for key information and any other news about the company behind the fund. Make sure you're happy with the fund manager's approach and where your money will be invested.
Always bear in mind that past performance is not a reliable indicator of future performance.
9. Check that you know the style of fund you're investing in
Funds are either actively managed, where managers make decisions about the investments, or passively managed (typically called a 'tracker'), where the fund is set up to mirror the performance of a particular share index, rather than beat it. All funds attract charges, so make sure you are getting value for money. For example, charges on a tracker should be lower than those on an actively managed fund.
10. Keep an eye on your investments
When you make an investment it's important to keep track of it. Read the financial press or visit financial websites. You can usually switch between funds, though some companies may charge for this.
11.Check any tax implications
Investments have different tax treatments. You should check the tax treatment of your current investments, and of any investments you are considering, to ensure you are investing as tax efficiently as possible. Read more about investments and taxation.
12. Seek financial advice
If you're unsure about what to do or don't want to carry out the research yourself then speak to a financial adviser - find a financial adviser.
