Invest like a pro with these five tips
5 min | 23 February 2023
If you’re thinking about investing for the first time or would like to improve your approach, a good place to start is to look to the people who invest for a living. Here are five techniques that could help you become a successful investor.
Getting the hang of investing and making a success of it can seem daunting, especially when it’s not something you do every day. The good news is that there are some straightforward things you can do to help keep your investments on track. Here are five practical steps to get you started.
1. Think long term
History shows that patience and commitment tend to reward investors, which is why it’s best tackled as a long-term exercise over many years. Timing the markets is something that even the professionals admit is virtually impossible. Your investments will almost certainly suffer periods where they fall in value, but they are also likely to recover if you stick it out. If you think you’re going to need the money next year for something like a wedding or holiday, investing may not be the right choice. But if you’re looking to build a nest egg for the future, it could be a great option.
This one's about not putting all your eggs in one basket, which means you’re spreading risk and giving yourself exposure to a wide range of opportunities. Many professional investors agree that a mixture of different investments is the best way to produce a balanced portfolio. Another route to diversify is by having exposure to different geographical regions around the world. The idea is that when some investments are struggling, others may be rising so you could get a smoother journey over the long term.
3. Invest regularly
The technical name for this principle is ‘pound cost averaging’, which means investing smaller amounts of money regularly. It helps you become a little less emotional in your approach because you’re investing no matter what state the market is in. It’s also a way to avoid being indecisive if you’re attempting to time the market (which we know is virtually impossible from tip one). Say you suddenly have £1,000 from a bonus or generous relative. Instead of investing it in one go, plan to split it into four £250 investments at monthly intervals. Investing in this way can give you a buffer against market ups and downs. Regularly drip feeding your money in means that you invest throughout the market cycle and don’t have to try and time the market.
4. Consider risk
There’s always some risk when you’re investing and as the disclaimers remind us, “you might get back less than you invest”. Risk is a personal issue, and it can be tricky to work out how much risk you’re willing and able to accept and what that means for the types of investments that are best for you. A financial adviser can help here and may suggest you start by investing a small amount and see what happens.
5. Are you an active or passive investor?
If you’re new to investing or have a bit more experience, but do not necessarily have the time to follow the markets every day, then a fund can be a good option. Two of the most popular types are active and passive funds.
- Active funds are actively managed by a team of professional investors who do all the hard work on your behalf. You pay a management fee when you invest in them. Active management means the managers can change the mixture of investments to adapt to changing market conditions.
- Passive funds (often called index trackers) come with lower fees, which means more of your money is invested. They passively track an index – like the FTSE 100 in the UK or S&P 500 in the US but there’s no active management.
- Specialist wealth managers can also be employed to actively manage your investments – selecting across active or passive funds, or both types, depending upon the service they offer.
If you’re not sure which one is right for you then it’s a good idea to speak to a financial adviser. Investing can be an exciting ride, but it’s important to do some research to see which approach you’d prefer to take.
Lastly, remember that volatility is a feature of investing and markets have bad months, quarters and years. Yet the evidence still supports the argument that exposure to the markets can be an effective way to build wealth over time.
Introducing Nutmeg, the digital wealth manager that's part of the Chase family. You can now open an account with Nutmeg (Opens in new window) and keep an eye on your investments from the Chase app – so you can see everything in one place.
Nutmeg is authorised and regulated by the FCA in relation to certain investment services and restricted advice only. Chase is a trading name of J.P. Morgan Europe Limited. Nutmeg and J.P. Morgan Europe Limited are J.P. Morgan companies. Products provided by Nutmeg are not guaranteed by Chase. Before applying, you should consider if a Nutmeg account and its features are suitable for you and your investment needs
Disclaimer: As with all investing, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest.
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