Top tips for first-time investors: How to ‘make your money do the work’ – expert advice

Barclays expert on possible long term growth from investing

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Many people often fear taking the first steps to invest, mainly due to concerns around financial loss. But there are ways to eliminate these fear-based hesitations by investing sensibly. Against the backdrop of a rocketing cost of living, now is the time to do what you can to make your money go further. While it may feel counterintuitive as bills continue to spiral; soaring inflation actually offers a good opportunity to start investing, according to an expert.

Inflation depletes the value of your cash and the worst thing you can do is leave it to devalue in a bank account.

Tom McGillycuddy, co-founder of CIRCA5000, said: “By investing, you can shield your savings from this effect and make the money do the work for you.

“It’s important to realise that investing is highly rewarding if you stick at it for the long term. It is by no means a get rich quick scheme, but rather a clever way of putting your money into circulation so that it builds up over time.”

Investing requires patience, and in the long run, your investments can beat the fluctuating economic trends like the rise of inflation.

Mr McGillycuddy said: “When you follow this approach, impact investing can actually be the best way to go – combining profit with purpose.

“With industries like clean energy and sustainable food on the rise – and outperforming traditional industry players in the long-run – making competitive returns doesn’t have to be at the expense of people or the planet.”

Investing can feel risky and knowing where to start can feel complex and daunting for some, so spoke to Mr McGillycuddy, the former Barclay’s investment banker, for his top tips to help you start your investing journey.

Think long term

The best way to make money from investing is to stick with it long term. Typically five years is a good place to start, but the longer the better.

Mr McGillcuddy: “Starting early allows compounding to really take effect – earning returns on your returns. For example, if an 18-year-old invested £100 into an account with five percent interest and did nothing else, they would have £1,043 by the time they retired at 65.

“It’s a long term game for higher reward.”

Invest Regularly

Most investors won’t start out with a large pile of money to invest. Putting a small amount aside each month makes much more sense when you can afford it.

Mr McGillycuddy said: “People often think that investing is all about timing, but this is not necessarily the case.

“Investing is not trading – you are not buying and selling on a short-term basis, and waiting for the right moment can often lead to not investing at all.

“By regularly investing a similar amount without waiting for your portfolio to go up or down, you are averaging the costs, which will balance out over time.”

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Setting up autopilot investing, where a set amount will go out of your paycheck each month into investments, will reduce the risk of emotional decision making and ensure a steady increase in your savings with minimal effort.

Diversify your portfolio

It is important that you don’t put all your eggs in one basket. Spreading your money across different countries, companies, industries and types of investment – such as stocks and shares, bonds and cash – will reduce your risk if one investment falters.

Mr McGillycuddy said: “It creates a smoother path to returns because when the value of a particular investment fluctuates, your overall finances won’t take a dramatic turn.

“This doesn’t mean buying lots of different individual stocks on the market. This approach can carry a heavy price tag (typically around £10 per trade plus stamp duty) and requires a lot of effort and expert knowledge.

“A good option for beginners is Exchange Traded Funds (ETFs), which are a type of fund that allows you to buy a basket of stocks that fit within a set of rules, called the index, rather than having stocks individually picked by a fund manager.

“This not only reduces the cost but is an effective way to diversify your portfolio across different themes and sectors.”

Emergency Fund

Once you’ve started investing, it may seem tempting to put as much of your money into investments as possible to up your returns and avoid inflation. ​​

Mr Mcgillycuddy said: “While investments are rewarding in the long-term, it’s important to also have an emergency fund kept in a bank account so that you can withdraw cash if an unexpected cost suddenly arises, like a broken boiler, losing your job, or unexpected healthcare bills.”

Markets fluctuate all the time. Even if a fund is overall on an upward trajectory, there will always be ups and downs.

Mr Mcgillycuddy said: “You don’t want to be caught out having to sell your investments when the fund price temporarily dips.”

Invest in companies of the future

Investing in sustainable and positive-impact companies isn’t just a nice thing to do – it’s also a fairly strategic move that will likely pay off.

Mr McGillycuddy said: “Our focus at CIRCA5000 is on impact investing, which means investing in businesses that are making an active positive contribution to people and the planet.

“Impact investing is just as profitable as traditional investing and often more so for two reasons. Firstly, these businesses are often better equipped to deal with rising issues such as climate change or regulation around social issues such as gender equality.

“Secondly, these companies are providing innovative solutions to world problems that need solving and so are in a good position for growth in the future – meaning bigger returns on your investments as well as a positive impact on the world. “

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