1. Never invest all of your savings.

Investing is a great way to potentially improve your finances, but don’t let it take over. You should always keep at least 3 months’ take-home pay or salary (whichever makes you feel more comfortable) in cash to act as an emergency fund. This stops you having to draw from your investments earlier than planned, and especially if the market falls, if something unexpected comes up. A great place to keep this money is in an easy-access savings account.

2. You should be happy to keep your money invested for at least five years.

We’re leaving ‘get rich quick’ behind us and focusing on ‘get rich slow’ now. Investments can go up and down on a day-to-day basis, but the longer you leave your money invested, the more chance you’re giving it to end high.

3. Get your risk level right

With all investments, you might get back less than you put in, as such it is really important to make sure that your investments are in line with your risk profile. This can increase the chance that you will get the returns you want, or decrease any anxiety you might feel around volatility. Some important inputs into getting the right risk profile for you would be how long you are planning to invest for, and also just your natural comfort with the daily fluctuations in the value of your savings. Generally, the longer you are able to invest for could enable a slightly higher risk level to be used.  

4. Manage your risks

Are you protected?

If you think of your wealth as a house, your income is the foundation of your finances. When you invest you’re looking to grow your wealth. But what if something happens to the foundation? By being adequately protected – with income protection or critical illness cover for example – you are solidifying that foundation. So when life throws you a curveball, you won’t have to sell your investments to cover any costs, and you know exactly how you will continue to cover your outgoings. So your money can stay invested and keep growing. 

Are you diversified?

The key way of limiting the risk of your investments is through diversification. The age old saying is to not have all of your eggs in one basket. This means spreading your money in different asset classes, geographical locations and sectors and industries. This will help balance out your portfolio and even out any losses that happen when a particular sector or region is underperforming. 

5. Drown out the noise

Whether the headlines are going viral on social media, in the papers or on the news, the best thing is to drown out the noise. Investing is emotional. There is no getting around it. You worked hard for those savings, so seeing them change value day to day is scary. But one of the biggest threats to your investments, would be to base decisions on market movements or what everyone is saying and doing on social media. (Remember NFTs? No? We thought so.) Uncertainty is scary for everyone. So you need to focus on controlling what you can control, and mute everything else. 

*With investing your capital is at risk. Your investments may go down as well as up, and you may get back less than the amount you invested.