If you want your savings to have the best chance of beating inflation, you’ll likely need to find a good investment for your hard earned cash. With the huge rise in TikTok advice, YouTube gurus and DIY forex courses, it can be difficult to know where to start.

This article will outline five things you need to think about when investing for the first time.

1. Figure out your investment objectives

If you are considering investing for the first time, first ask yourself why you are considering making this investment. It may initially be to ensure your money keeps pace with inflation or for retirement. You may even be investing to cover future school fees.

You should first determine your why, this will help gauge if 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 this is you, it’s likely going to be better to keep the money in cash or fixed deposits because if markets do fall, you’ll have little time to recover any losses. If your £100,000 turns into £90,000 just before you need to buy a home, that’s going to be a painful loss to stomach. Allowing yourself adequate time before you need to access your money will allow time for the portfolio recover.

2. Decide which investment vehicle you wish to use

This is important because whilst a pension might provide, 20%, 40% or even 45% tax relief, if you are investing for a goal in 10 years time and your 32, you won’t be able to touch the money in a pension for 25 years! If you need the money before retirement, a Stocks & Shares ISA is likely to be the better 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.

3. Be prepared to see the value fluctuate

Now we’re not saying that you should invest into anything that is going to purposefully lose you money, but if you are considering investing for the first time, it’s important to recognise that market falls are a natural part of investing. There will be times when the market temporarily fluctuates in value and you need to be prepared to weather these storms.

Navigating a down market | Vanguard

4. Remember to diversify your investments

The last few years have seen a number of individuals become exceptionally wealthy almost overnight by going “all in” on meme stocks, crypto and other high risk investment strategies. Whilst there have been winners, there are also a much larger number of individuals who have lost thousands in the process. Diversifying your investments means your fortunes are not tied to one asset, company or geographical location.

5. 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 effecting your lifestyle. Then there is your attitude to risk which is more subjective, broadly speaking, how much of a fall could you withstand in your investments before you want to pull the plug. It’s important to identify both of these, this is where an independent financial adviser can help you formulate the most appropriate strategy, taking into consideration all these factors.

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.

T: 01268 944122

E: p.denning@sterlingandlaw.com

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