Stock market movements are out of everybody's control and no one knows what the future will look like, but following simple investment rules gives investors the best chance of achieving greater returns.
With the April 5 Isa deadline coming up, now is a good time to consider the key investment rules that will help grow savings. This is all without changing core investment beliefs, such as which stock markets or business sectors could perform best in the future, or which are best suited to someone's aims and goals.
Cutting fees paid on investments is the single most effective way an investor can make money go further. One area that is easy to cut costs on is the management fee of an actively-managed fund. The average fee is around 0.75pc, according to the City watchdog the Financial Conduct Authority, so if a saver is paying over that then they might be getting a raw deal.
Fees are also paid to stock brokers and vary depending on how much money and where it is invested. Investors should check they are investing in the most efficient way. Switching brokers is normally free and painless, so savers should compare the market and decide which is best fund shop for them.
Pound cost averaging
三级成人视频Drip feeding a set amount of money every month into investments – known as pound cost averaging – means that investors can take the sting out of market movements. Sarah Coles, of broker Hargreaves Lansdown, said: “This means your money goes further during the dips, and benefits through the rises, so you end up paying an average price for your shares.”
三级成人视频Fund shops will allow investors to set this up and often offer discounts for investing this this way, so it really is a winning strategy.
Despite what experts tell you, no one really knows what will happen in markets. The best way to protect savings is to have a balanced portfolio across a range of investments. If one falls in value, then other parts of the portfolio should perform better.
This can be done manually, where an investor picks a range of investments themselves, or through a pre-made diversified portfolio, such as Vanguard’s LifeStrategy range. An investor can choose between portfolios of diversified stocks and bonds that reflect their investment horizon, all at a low cost of 0.22pc.
Consider passive funds
Passive funds 三级成人视频track whole stock markets or investment sectors for a low cost. It is one of the best ways of cutting fees, which boosts returns. Studies have shown that passive funds actually give you a better chance of beating professional stock pickers over the long-term.
In America, just 15pc of company fund managers beat their benchmark over 10 years, according to financial data group Morningstar. In Britain it was 40pc for large company managers. It is unlikely that an investor will be able to pick the winning managers, and they cost more, so going passive can be a smart choice.
Ignore the noise
There is always going to be a reason to put off investing, according to Laura Suter, of fund shop AJ Bell. Investing for the long term means drowning out all the noise and focussing on what markets will be doing in five years or 10 years, not the next 10 minutes, she said.
三级成人视频This means investors should not check their broker account regularly and think about market falls as good buying opportunities, rather than losses in money. Emotionally this can be very difficult, but over the long term it will pay investors back.
Use Isa allowances
The government gives everyone a £20,000 Isa allowance each year which is then protected from tax – so investors must make sure they use as much of it as possible.
This is generous, according to Ben Yearsley of Shore Financial Planning, an adviser. “On a typical dividend yield of 3.5%, £700 of income could be generated tax free each tax year,” he said.
Get a 25pc boost
An investor saving for a first home deposit or retirement fund can benefit from free Government cash by opening a Lifetime Isa (Lisa), according to Ms Suter.
“With the Lisa, you can get up to £1,000 a year in Government bonus, up until the age of 50. If you opened a Lifetime Isa at age 18, that is a maximum Government bonus of £32,000," she said.
Investors are drawn to companies they think they know best, but this can be a mistake. The average British saver has more than 80pc of their investments held in British companies, according to Interactive Investor, a fund shop. Around a quarter of funds owned are also in British stock funds.
But Britain accounts for just 2pc of the global economy and 6pc of the global stock market, meaning some portfolios are unbalanced and too exposed domestic politics or economics. On top of that, international companies have performed better than domestic ones in the past decade, so many Britons have missed out on returns as well.