Five tips for first-time investors

Investing for the first time can be daunting, but for those who are in it for the long term, it could help you achieve your goals more quickly.

Although the stock market goes down as well as up, history shows that, over long periods, shares tend to perform more strongly than cash and grow ahead of inflation.

 
Here are some tips to help you get started.

1. Know your goals

Setting a goal will give you something concrete to work towards. You will need a relatively long-term aim to give your investments the time to ride out any market volatility. Perhaps you wish to save towards retirement, for example, or your children’s future.

During short-term market falls, focusing on your goals will also reduce the risk of you selling out and crystallising losses.

2. Set up regular investments

You don’t need a large sum to start investing. In fact, drip-feeding what you can afford each month – or gradually whittling away a lump sum – could be beneficial during times of stock market turmoil and economic uncertainty.

Your money buys more shares at a cheaper price when the market falls, and fewer shares at a higher price when the market rises. This averages out the price at which you buy investments and, over time, could help to smooth portfolio performance.

3. Use your tax allowances

Remember your Individual Savings Account (ISA) allowance, which renews on 6 April. This amounts to £20,000 for the 2024/25 tax year. Investments inside an ISA grow free of tax, which means more of your money goes towards your future.

4. Manage your emotions

Letting your emotions dictate your investment decisions isn’t the sensible route to returns. It’s understandable to experience some jitters if the stock market falls, particularly as a first-time investor. Try to hold your nerve, and once you’ve dipped your toe into the market, stay there.

5. Diversify

It’s wise to choose a spread of investments – including equities, bonds, and cash – because different assets tend to behave in different ways in a range of market conditions. This could help to even out returns and reduce the impact of any particular asset falling in value.

For beginner investors, this can be a daunting task – and that’s where getting some financial advice can help. An adviser will help you spread your money across a diverse range of investments in a way that suits your personal needs and risk profile. They will also ensure you’re taking advantage of all your tax allowances and reliefs, so that you can feel confident your money is working as hard as it should be.

The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy.