Tips for investing £20,000
Ensure your portfolio is diversified
Investing across a broad spread of shares and asset classes reduces risk. If one holding performs badly, it doesn’t drag all your portfolio down with it. Think of it like spreading your bets.
Watch your charges
Consider investing in passive funds which replicate the performance of your chosen index. They are much cheaper than actively managed funds and often achieve similar results.
Make sure your investment is tax effective
If your money is not held in a tax-free wrapper like an ISA or pension, you may have to pay tax on your proceeds.
Don’t let emotion get in the way
It’s important not to let your heart rule your head. Successful investing takes time and when markets are volatile it usually makes sense to hold your nerve, not panic and sell.
Don’t get bogged down trying to pick the ‘right’ funds
It doesn’t matter if you don’t pick the absolute top performer. It’s length of time in the market and asset allocation that really matters.
Think about risk
Your investments shouldn’t keep you awake at night, but not taking enough risk could mean you don’t get the returns you need. This means it’s important to be level-headed and take a calculated risk. As a general rule, the longer you have until you need your money, the more risk you can afford to take. You can always reduce risk further down the line as you near retirement or your objectives change.
