5 Ways You Can Be A Better Investor
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
Are you fully aware of all the ways you could be doing more with your money? Now is an ideal time to think about the ways you could be a better investor, Summer is over and there are a few months until Christmas, so why not use this quieter period to get on top of your personal finances?
Start by taking a holistic view of all your income and expenditure. Look across your various accounts to identify where you could commit extra disposable income towards investing. You’ll be surprised by how much extra you can potentially spare, and technology such as True Potential’s Personal Finance tools helps to identify your incomings and outgoings across your various financial accounts.
You’ve found more disposable income to invest, now what?
Investing in a globally diversified Portfolio is an effective way to manage volatility. If one asset or region underperforms, diversification means that other assets or regions may perform stronger. You aren’t putting all of your eggs in one basket.
Given the volatility around Coronavirus, the US election, and Brexit, now is a good time to ensure your Portfolio is globally diversified. True Potential’s Portfolios benefit from Advanced Diversification, with our range of Portfolios uniquely diversified by asset class, industry, region and investment manager.
You’ve identified extra disposable income, and you’ve invested into a Diversified Portfolio. The next step is to be disciplined enough to make that investment a habit, and to keep the money invested.
Investing is about time in the markets rather than timing the markets. We believe it is better to stay invested for a minimum of five years and you could ride out fluctuations in the markets. You need the discipline and nerve to not panic if markets are volatile, safe in the knowledge that this is a natural part of market movements.
Staying invested during volatile markets means you can be part of the bounce when markets recover, as witnessed earlier this year during the Coronavirus market dip, albeit past performance is not an indicator of future performance.
Have the discipline to not be emotionally affected by short term political and world events, in the knowledge that being invested and continuing to invest for a long-term period is an effective way to grow your money.
Set up a Direct Debit Pound Cost Averaging
One of the simplest things you can do if you want to be a better investor is to set up a direct debit to invest a set amount each month into a Stocks & Shares ISA. This takes care of the staying disciplined part for you, and it also ensures you benefit from Pound Cost Averaging.
Pound Cost Averaging works by smoothing market volatility, you invest at regular intervals rather than the occasional lump sum. The benefit of this is you end up purchasing more units of a fund when prices are low, meaning you could be better off in times of turbulence than you would have been if you had simply invested a lump sum.
Take Advantage of Allowances
Are you contributing enough into your Pension? By increasing your contribution, you are also increasing the amount of tax relief you will receive on your income. Some of the money that would have gone to the government will go to your Pension pot instead. As a basic rate taxpayer you will see 20% tax relief claimed automatically, the extra 20% and 25% for higher and additional rate taxpayers can be claimed via self assessment.
So, if you want to keep as much of your salary as possible, then pay as much of your payslip as possible into your Pension. This could be an important consideration in the coming years, as the Government may look to taxes to pay for schemes such as furloughing. Make sure your personal finances are as tax efficient as possible and take advantage of as many allowances as possible.
Do More Through Technology
One thing that lockdown proved is that technology can make all of our lives easier. Mobile apps have became the norm for ordering a coffee or ordering a taxi. It is no different with investing, apps and technology enable you to top up your investment and check your performance.
Download the True Potential app now to do more with your money, you can impulseSave® from £1 and check your investment performance 24/7. Subscribe to the True Potential YouTube Channel, here you’ll find helpful videos on investing and using True Potential technology.