Six tips for a first time ISA investor

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Written by: Tom Stevenson
06/02/2017
Many people will be looking to make the most of their £15,240 ISA allowance before the tax year ends. For those who are new to investing in a stocks and shares ISA, here are six tips to help you get started.

1. Identify your investment goals

Before you venture into the world of investing be sure to set out clear and realistic goals. You should think about what you want to achieve and when you want to achieve it by. On top of that you will also need to consider how much risk you are willing to take to achieve your goals when building your ISA portfolio – higher risk investments hold the promise of more lucrative returns but also come with a greater risk of losing your money.

2. Consider getting some guidance

Investing is sometimes described as simple but not easy. The principles are not difficult but putting them into practice amid the inevitable market noise is difficult. If you’re new to investing you may want to consider getting some guidance to help you cut through this noise. Guidance is about helping you towards the options that are available and equipping you with the information to make better-informed choices. Fund platforms or supermarkets have a range of guidance tools to help first time and experienced investors alike.

3.  Start early

The earlier you start investing, the more time you have to reap the rewards and benefit from the magic of compounding. Remember you don’t have to stump up a lump sum at the start of the tax year to put into your ISA. A monthly savings plan is a simple way to start investing early and make regular contributions into your ISA savings pot. Furthermore, starting early and splitting your payments throughout the year can lead to better returns overall than investing a lump-sum at the last minute.

4. Take a long term view

Investing should ultimately be a long-term game – don’t be put off by short-term market jitters. While it might be tempting to jump ship when markets get choppy, time in the market matters much more than timing the market.

5. Don’t put all your eggs in one basket

2017 looks set to be another year of uncertainty so it would be prudent to protect yourself against any potential market volatility. The best way to future-proof your investment portfolio against the market’s ups and downs is to remember the old adage of placing your eggs in several baskets. No-one knows what lies ahead and the best defence is to diversify your holdings across a range of assets such as bonds, equities and property and around the world’s geographical regions.

 6. Avoid staying in cash

With interest rates languishing at rock-bottom levels and inflation back with a vengeance, you need your savings to work even harder to generate a real return. Holding your money in cash can result in very limited returns over time. Our calculations show if you had invested £15,000 into the FTSE All Share index over the 10 year period from 31 December 2006 to 31 December 2016 you would now be left with £25,769. If, however, you had invested £15,000 into the average UK savings account over the same period, you would be left with a paltry £15,846. That’s a difference of nearly £10,000 – too big for any sensible saver to ignore.

Tom Stevenson is investment director for personal investing at Fidelity International

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