Spreading your risk can help build long-term gains Staying invested, rather than frequently moving in and out of markets, can also help to keep costs low and enhance long-term returns from a diversified mix of investments. Splitting your risk across different kinds of assets can help to smooth out your investment returns over the long term. Over time, it can make sense to reduce your reliance on any one type of investment by spreading your money across different markets. If you’re confident that the market you’re buying into is set for a significant near-term rise and don’t want to miss out on possible early gains then making a lump-sum investment gets you fully invested immediately. If you have received some money unexpectedly, perhaps from an inheritance or a work bonus, then investing it all at once can be more convenient. Once you are ready to begin investing, there are 2 main approaches to the timing:Īnother approach is to commit all the money you intend to invest in one go. While stock markets can of course go down as well as up, and returns are not guaranteed, holding funds that invest in some of the world’s biggest, well-established companies can provide you with income, as well as some element of security. If you feel ready to begin investing, then it’s sensible to start with mainstream investments, such as funds that invest in a range of companies on your behalf. If your day-to-day finances are in order, you’re already saving regularly into a pension and are well prepared for any financial emergencies, you could be ready to start investing. So be sure to contribute to your pension on a regular monthly basis before you make any other investments. Missing out on one monthly payment here and there can easily become a habit - one that might be costly when you retire. If you are paying directly into a private pension scheme then it’s important to maintain regular monthly contributions. However, if you’re not enrolled in a workplace scheme, it’s important to think about how you will fund your retirement. You won’t be able to access this money until you are 55, but these benefits make pensions ideal for investing longer term. Your employer will invest the money for you through the workplace pension – you just have to tell them how much you want to contribute. For all but the highest earners, you don’t pay tax on money invested in your workplace pension, meaning that your money will go further. Many people of working age will benefit from a workplace pension, a way of saving for your retirement that’s arranged by employers. But making regular monthly contributions from an early age can make a huge difference to your pension pot when the time to retire eventually comes. Contribute to your pensionįor many of us, our retirement might still seem like a lifetime away. It can bring you peace of mind to have a decent financial buffer in reserve, so it makes sense to build a rainy-day fund before you begin to invest. Many experts recommend having an emergency fund that can cover your outgoings for between 3 and 6 months. Missing a payment will also damage your credit score, making it harder and more expensive to get credit if you ever need it in future. So if you still have any debt, make sure you don’t miss making any payments ahead of their due date – any penalty fees/charges and the interest you incur will more than offset any gains you’d make on an investment. You should prioritise paying off things like credit card debt and payday loans before making any investments. The interest rate you pay on the vast majority of short-term debt is likely to be many times higher than the rate of return on any investment you make. Prioritise debtīefore you begin to invest it’s sensible to pay off any debts. And in the more immediate term, there’s something very satisfying in researching investments, then taking the first steps that can make your financial future more secure.īut with the main benefits of investing likely to show over the medium-to-long term, before you are ready to invest it’s worth making sure that your immediate financial circumstances are in the right shape. Over the long term, investing can smooth out the effects of weekly market ups and downs. As savings held in cash will tend to lose value because inflation reduces their buying power over time, investing can help to protect the value of your money as the cost of living rises. Investing can bring you many benefits, such as helping to give you more financial independence.
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