Hi all! After 7 or so months on Freetrade during a tumultuous market I thought it might be helpful to even newer investors to share a few thoughts (admin or @NeilB please relocate/delete as applicable).
Max your pension first. It depends on your tax band but you’ll save anywhere between 20% to 60% (a certain income bracket) on the cost of your shares in tax relief. Yes you’ll pay tax as an old ‘un when you withdraw but you’ll be retired by then so basic rate of dead . That is the most important rule (in my opinion)
Diversify. Definitely buy a fund as opposed to individual shares if you’re risk averse. But if you want to go for individual picks, someone on here once said to have no more than 5% in one company. Great advice.
Don’t go too quick so soon. Easy tiger. The market isn’t going to take off without you (especially now!). Monthly investments are sound as a pound.
Beware of averaging down. What if it keeps going down? Spread your money across all your stocks, good and bad (I’ve failed on this one by the way!)
Invest in “big” stocks, at least to start with. But always check the balance sheet even so. Go FTSE or S&P 500 etc until you know the ropes. I don’t know what the “ropes” are so I’m steering clear (generally ).
Enjoy the experience! It’s fascinating what stocks do, individually and as part of the wider market.
Be patient and don’t fiddle with your investments if you believe in them (My worst trait!)
Most important by far (apart from my boring pension bit) - don’t regret it. By what I mean is don’t go mad and put your wallet “lifestyle” money in - life is for living after all.
I would add -
Don’t be afraid to walk away with a loss or lock in a win IF regardless of the price you’ve fundamentally changed your opinion on the company.
I wouldn’t necessarily agree with the first point. If all your assets are in a pension then it’s locked up for decades (depending on your age) so you can’t access it, you may well hit the LTA (fingers crossed?) and if you do you may well be a higher rate tax payer anyway.
LISA, and normal ISA alongside pensions allows you to manage your cash flow more flexibly (and tax efficiently in many cases - but I’m not a tax advisor so do your own research).
Edit: Inheritance rules, divorce implications, benefits calculations, international residence all come in to it as well. So it really does depend on the situation, there’s no one size fits all.
Fair point amigo. But the LTA should start rising again - beware in the interim a a 55% tax hit if you screw it up (at present). Who knows? I’ll pay into my pension until further notice.
Big warning: LISA has a big tax hit i.e. you will pay more as a penalty than the government put in if you want to withdraw against the rules (i.e. 1st House below £X. and/or locked to upper age rule). So be very very clear whether a LISA is right for you.
I agree with @TInvest the Pension thing is not the best advice for everyone and may contradict your point 8. There are several factors worth taking into consideration. For example if you have a company pension, especially a matched contribution one, the best thing to do is to match that pension at the highest level. Then you need to think about your life style and whether in fact it may make more sense to max an ISA before you max a separate SIPP**. I am not saying this the right strategy for everyone but it probably is a good strategy for many.
** realistically though most people won’t be able to max either and so should think of how they want distribute their savings.
I know everyone’s circumstances are different, sure!
I generally prefer ISAs over pensions in most cases due to instant access.
While I generally am intending to build wealth, it’s nice to know I could withdraw if a true need arised, with a pension (including SIPP) this inst possible.
As a tax professional of 25 years, my post was purely based on the long term. Apologies if that was lost in translation. I was only trying to be helpful/informative of my amateur investing experience - won’t do that again in a hurry
Carry on… we all are learning as we go.
Agreed, it’s a long term commitment if it is for retirement so need to know it is right for you.
Some good points for sure. Dollar cost averaging on a routine basis helps me remain disciplined. I also like investing into a core index fund as my majority holding and then focusing on a small number of individual companies I ‘like’ around that. Not rocket science and it’s a pretty widely advocated approach so nothing new or groundbreaking.
Keep it all in an ISA and I am pretty content with things and don’t have sleepless nights.
I’ve only been buying shares for a year and the one piece of advice I would give my self from a year ago is don’t get caught in the hype of ipos my portfolio would look a lot better if I had known this.
The probably is superfluous
Pretty good advice for the most part, I know some people disagree on the pensions bit.
The most common beginner mistake I see is trying to pick a stock that will make them rich straight away. then they get stuck in a cycle of averaging down on a falling penny stock and getting overexposed to it. So number 5 is my favourite point. Nothing against trying to pick a big winner but get some stable profitable companies or funds in first.
My advice to beginners can be summarised in three words: just buy VWRL.
Enjoying this topic, brand new to the whole thing and just playing with small money to learn the ropes, hopefully any mistakes will be learned early on but great to pick up these bites of wisdom from you guys so thanks, and thanks to the original poster. Cheers
VUSA is a viable alternative.
Vusa is a must(or vuag),and then at least 3 or 4 other etfs in ny opinion.
Wouldn’t VWRP be a better choice for beginners? It tracks the same index and as it’s accumulating there’s no hassle about reinvesting dividends because it happens automatically.