So you’ve started investing, what next?

There’s been a surge in people investing for the first-time over the past year. Whether it’s having more time during lockdown to finally getting around to sorting out your money, saving money during the pandemic and wanting to put it to good use, or finally getting fed up with cash savings rates being pitifully low, lots more of us have taken the leap into investing.

But if you’ve opened an account, put some money in and picked an investment or two, what’s next? Here we explain five steps to ensuring you investments don’t become like that crafting project you started at the beginning of the pandemic – forgotten and unfinished.

If you’re still very new to investing check out our first-time investor guide to help get you started.

1. Make it regular

If you know you’ll have a bit of spare money left at the end of each month that you want to invest, then set up a regular payment. This automatically moves money from your current account into your investment account, like a direct debit, and means you don’t have to remember to do it each month. Work out how much you want to invest and then set the amount, it can be as little as £25. Remember, you can always add to it with a lump sum deposit every few months if you find yourself with more money to spare.

If you want to go one-step further you can then set up regular investments in your account so that money is automatically invested for you. Just pick which funds or shares you want to add to each month and set it up – and as an added bonus you could save on fees.

2. Don’t buy too many things

In the excitement of getting started with investing it can be tempting to invest in lots of different things, like a kid (or me) in a sweetshop you might want to buy everything. You’ve probably heard about ‘diversifying’ your portfolio, which basically means making sure that you’ve got a spread of different investments, and while this is important it’s also key not to make too many investments at once.

First, it means that you’ve got way more work to do to keep track of them, and second, it means that fees will start to eat away at your money.

Here’s an example of the fees problem. If you have £1,000 to invest and you buy 10 different funds, that will cost £15 in total (£1.50 per purchase). That means your funds need to all rise by 1.5% just to get back to your initial investment amount. However, if you just invested your £1,000 in two funds it would cost £3 and means your fund only needs to grow by 0.3% to get back to your original sum.

3. But make sure you buy enough

At the risk of sounding a bit like you can’t win, you also want to make sure you’re not putting all your eggs in one basket. If you build up a decent amount in your investment account and just invested all your money in one thing, you’re very reliant on that fund or stock doing well. You might hit the jackpot and it steadily rises, making you lots of money. But the risk with investing is that you could lose money too, and if that one investment falls in value a lot you could end up wiping out a big chunk of your money.

The aim of the game is to get a decent spread across funds or stocks, but also across different investing areas. So you probably don’t want all your money in just emerging markets or just technology companies, you want a sprinkling here and there.

Exactly how many funds you want to have and how many different areas you want to invest in depends on how much risk you want to take, so annoyingly there’s no one-size-fits-all number I can give you. But as long as you’ve thought about it and you’re comfortable with your spread of investments you should be good.

4. Are you in the right account?

You will have set up your account and started investing but it’s good to double check your money is in the right place. Most people will have picked an ISA for their first investments, which is more tax efficient than having it in a dealing account. If you picked a Dealing account you might want to reconsider whether an ISA is better for you, as you won’t pay any tax on your investment growth or income (whereas you will in a dealing account). The investments you can make are exactly the same and the only big difference is that you can only put £20,000 a year into an ISA – but if this is your first foray into investing I suspect that’s probably enough.

Another option is a Lifetime ISA. This could be a better account if you are specifically saving for a first home, as the Government will add some bonus money to it that’s pretty unbeatable.

Your final option is a Self-invested personal pension (SIPP). Now, it’s pretty likely that you might want to build up a savings pot in your ISA before getting a pension, particularly if you’re not yet on the housing ladder or have something specific you’re saving for. But lots of women have much smaller pensions than men, and once you factor in any future potential career breaks, part-time working or maternity leave, it can get a bit neglected. So it’s worth thinking about whether you can spare any money now to top up your pension pot. And remember, you can split your money across different types of accounts if you want to save for different things.

5. Have a plan

Much like you wouldn’t set out on a journey without popping your destination in Google Maps (or having an AA map printed out for old-school people), you will find your investing journey easier if you’ve got a plan. This doesn’t have to be pages and pages of rules and calculations, but you just need to ask yourself a few questions to make sure you stay on track.

Here are a few to get started: Why are you investing? Do you have a timeframe or goal of a certain amount in mind? What kind of investments do you want to make? And how will you decide which investments to pick as your pot grows?