The six golden rules of investing

Remember, you can take a look at our glossary for explanations of the investment terms used throughout this article.

In uncertain times, reacquainting yourself with the basics of investing can help make it easier to decide what to do next. So here’s a review of what we consider to be some of the golden rules of investing.

Please note that, the value of your investment can go down as well as up so you might not get back the amount you put in.

1. Keep some cash ready. Life’s full of surprises. So whatever you’re investing in, first make sure you have enough money that you can easily access to cover any unexpected expenses. Around six months’ worth of spending sounds sensible, but it should be whatever amount you feel comfortable with.
   
   
2. Start investing early. The earlier you invest, the more time your money has to grow into a nice sum. Starting early takes advantage of compound interest — the name given to the returns you make on money that you previously earned as interest. In other words, your money earns returns on its returns. Compound interest speeds up the growth of your investment over time, and who doesn’t want that?
   
   If you’re saving for retirement and aren’t sure how much to invest, there are pension calculators that can give you an idea about how much you should put aside each month or year to reach your target (if you have one). But it might simply be less stressful to put aside what you can, as soon as you can.
   
   
3. Focus on the long term. Few, if any investments are fully protected from the ups and downs of the stockmarket. But the longer you invest, the more time your money has to even out any peaks and troughs along the way. Remember, when it comes to stocks and shares, it’s not about trying to time the market. It’s the time in the market that counts.
   
   
4. Don’t put all your eggs in one basket. A diversified investment is a mix of different asset types, like equities (shares in a company) and bonds, which tend to perform well in different market conditions. Holding a good mix helps spread some of the risk if any of your investments hit more downs than ups.
   
   You can, of course, decide for yourself how to allocate your money across different assets, companies, markets and regions. But professional fund managers have the skills and resources to do this for you. And, by choosing a ‘ready-to-go’ multi-asset fund investment, your money is diversified by experts based on up-to-date market information and research. So when it comes to your hard-earned money, it could pay to leave these decisions to the professionals. 
   
   
5. If in doubt, seek professional advice. There’s lots of choice out there and making decisions about investing can sometimes be overwhelming. So it makes sense to speak to a professional in the first instance. If you’re ill you see a GP, if you’re moving house, you speak to a solicitor. We use experts for a whole range of important decisions that impact our lives, so why should our investments be any different? Your investments need to be the right fit for your personal circumstances and long-term aims. For help finding an adviser that’s right for you, visit our financial advice page.
   
   
6. Make the most of your tax-wrappers 
   To avoid giving more money to the taxman than you have to, it’s important to make the most of the tax wrappers available to you each year. ISAs (Individual Savings Accounts) and Junior ISAs are known as ‘tax wrappers’. This means that they ‘wrap’ around your investments protecting them from capital gains tax and personal income tax. You can transfer your ISA between providers, and you don’t have to declare it on your tax return (if you complete one), saving you time and effort too.
   
   ISA tax rules may change in the future. ISA tax advantages depend on your individual circumstances.
   
   The views expressed in this article should not be taken as a recommendation, advice or forecast. We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser.