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How to start an investment portfolio
During these times of pandemic and all its associated strains on counsel and client alike, your own financial wellbeing might not be at the front of your mind. As uncertainty becomes the new normal, the decisions you take today could be invaluable to you in later in life.
When it comes to investing, key decisions should still be straightforward ones. Our partner Nutmeg explains the top five considerations to be aware of:
1. Know your goals
This sounds obvious but with a clear idea of what you want your investments to do, you’ll be able to manage all the other variables more easily and not get distracted. Do you want to retire sooner? You may need to start putting more money aside today.
Do you want to take more risk now and less later? You need to know how much money you are willing to invest at a higher risk of loss.
Will you have dependents who you need to support? You may want to set up separate investment accounts in their name.
2. Know your assets
Knowing what you’re investing in is essential. Equities usually provide higher returns but are more volatile, whilst government bonds usually have lower returns but are seen as safer. A balanced portfolio that has a ratio of the two is seen by the financial world as prudent when it comes to investing.
3. Know your risk
No investment is without risk so knowing how much you can tolerate is essential. Higher risk can lead to higher returns but this is not guaranteed. With a pension you are investing for retirement so you may want more security and only very little risk. In other investment portfolios you may decide you can take on more risk.
4. Know your product
Whatever you are using to invest, be it a stock-picking platform, a private professional or a managed portfolio, you must know the fees and rates the product charges as well as things like your risk exposure and how easy it is to withdraw your money – how ‘liquid’ it is.
It’s your money: transparency is everything. And, of course, don’t invest in anything you don’t understand.
5. Stay informed
Information is power. As well as keeping all of the above in mind, keeping abreast of market movements and macro-economic drivers such as geopolitics is important. Likewise, knowing the latest inflation measures and interest rates will help you gauge how well your investment is doing relatively.
Beginning your journey
The simplicity of these five considerations doesn’t disguise the complexity of equity drivers, or the multifaceted nature of market relations. But looking seriously at these points when you begin your investment journey will allow you to make decisions on your own terms and to know your expectations and investment parameters.
More and more people are investing via an investment ISA. They allow you £20,000 of untaxed investment per year and give you access to equities, bonds and cash at a risk ratio of your choosing.
The Law Society has partnered with Nutmeg to help members make the most of their investment opportunities. Nutmeg is a multi award-winning digital wealth manager that has provided competitor beating returns to first time investors and experienced financial professionals alike.
As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest.