Despite the soaring popularity of investing, there are still many people both unsure how to get started and knowing which route would be most financially beneficial to take. Express.co.uk spoke exclusively with Emma Keywood, Senior Product Manager at Dodl by AJ Bell.
She outlined her top tips to consider when someone decides what investments are best for them.
She said: “Investing your money shouldn’t be something that you rush into. It’s important to take your time and assess your personal finances to identify how much money you can realistically afford to invest.
“Once you have clarity on how much you plan to invest, it is also important to be clear on how long you plan to invest for as this can determine how much risk you are prepared to take.
“The longer your time frame, the more time you have to ride out any short-term fluctuations in investments and hence you may be more comfortable considering slightly risker options, at least for part of your investment portfolio.
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“Having short, medium, and long-term plans can prove useful when it comes to road mapping your projected timelines, with full appreciation of the fact that even the best laid plans are subject to change.”
Ms Keywood explained that Britons should do their research before investing into anything. There are many different avenues of investment.
The mainstream options are company shares, bonds, and property as well as some alternative investments such as infrastructure where you are investing in construction projects.
She said: “You can invest in all of these directly or via a fund which chooses the investments for you – the sheer number and variety of potential investments can be confusing and ultimately make a decision difficult to come to.
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”It’s worth spending a decent amount of time reading into the different ways of investing your money to ensure that it is the right route for you to take.”
With investing comes many risk which people should be aware of.
Britons need to know what they are getting themselves into before getting into anything.
She continued: “Taking the leap and investing comes with risks and rewards attached. This need not be as scary as it sounds.
“There are lots of funds that make the investment decisions for you and are designed to fit different risk levels, so you just need to decide which risk category you fall into.
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“A good way of getting started is to regularly (monthly) invest small amounts that you can afford to leave invested for a long time (a minimum of five years). This gives you a better chance of getting higher returns for your money over time.
“You should never put yourself in a position to be out of pocket – always know your financial limits.”
Ms Keywood explained that another way of managing risk is to follow the old adage of not having “all your eggs in one basket”.
Similar types of investment tend to perform in unison with each other, so if someone invests in 10 different technology companies it is likely they will perform broadly in a similar way, even if they do slightly different ways.
However, technology companies as a whole are likely to perform differently to oil companies or banks because different things affect their businesses.
Ms Keywood added: “Diversification is not investing in lots of companies but investing in companies that make their money in different ways.
“If you are unsure of doing this yourself, investing in funds is a good way to achieve diversification because they invest in lots of different companies.
“You can take this one step further by investing in a number of different funds with slightly different approaches.
“Investing in just a few funds can mean you are actually invested in hundreds of different companies, ensuring your portfolio is diversified and ultimately spreading your risk.”
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