Planning for your financial future is never easy, but concerns about the current state of the economy and investment markets can make this even more challenging.

The value of your property, pension and investments (i.e. your future financial security) are all in some way impacted by the fluctuating fortunes of the market. It’s no wonder so many find it difficult to create and stick to a clear financial plan.

However, after an extremely volatile and unsettling 2020, markets have since pushed forward, so much so that many of our clients find themselves in an even better financial position than they were at this same point last year.

“How can this be?” I hear you ask.

Well, they took our advice and stuck to our five simple rules for successful investing:

(1) Diversify, diversify, diversify.

There is no perfect investment out there.

Different assets (shares, cash, property, currency) move in seemingly random directions every second making them very difficult to predict.

A well-balanced and managed basket of these types of assets (invested globally) has and always will be the most steady and reliable way of growing your money over time.

Don’t try to be too clever and don’t get hung up on one type of investment. If you get it wrong, it adds significant risk to your money (it’s basically gambling) and can be incredibly stressful.

Markets and economies have continued to grow and expand over time. Put your faith in that fact and have a good spread of assets.

(2) Apply Murphy’s Law

If you need to take a chunk of money out of your investment portfolio for the kid’s school fees or you’re about to start drawing on your pension, the last thing you want is for that to coincide with a temporary drop in markets (this is a sure way to realise losses).

One of the easiest ways to plan for this scenario is to have a reasonable cash buffer to call on.

It avoids you realising losses and buys your investments time to recover their value, so that they’re in a better condition to draw from.

Decide how much of a buffer you need and leave it in a savings account. Protect your long-term investments.

(3) Block out the noise

Nothing has as much impact on the way we feel about our money (and the world) than the media.

You need only look at coverage of the pandemic to understand just how much fear sells and the impact this has on our emotions.

Reports of dramatic stock market falls are inevitably (and unfortunately) followed by swathes of lay-investors selling their investment funds and ISAs out of fear. Rationally, this is the worst time to sell but the fear of loss can be too powerful for many to manage.

World events are important – and it’s not all fake news – but don’t base your financial decisions solely on today’s headlines. Try to keep a long-term perspective.

(4) Make progress in other ways

If you have money invested in markets and conditions start to get rocky, it’s generally a good idea to sit tight and wait for things to improve (they always do).

But that doesn’t mean you can’t still make some decisions to help move your financial plan forward.

It can be as simple as making sure you continue to use valuable tax allowances like ISAs and pensions. It could also mean finding ways to reduce fund management charges on your investments (or perhaps even finding cheaper life or health insurance).

It’s natural to want to hide under the duvet when the going gets tough, but there’s always some positive action you can take.

Keep your mind open to options.

(5) Automate and consolidate

Making financial decisions can, for some people, be anxiety-inducing, time-consuming or even just plain inconvenient.

One way to help solve this problem is to automate your finances in some way.

For example, rather than leave your unspent income accumulating in a savings account (earning no interest), why not set up a monthly investment payment into an Investment Account, ISA or pension?

This requires little thought or time and, like many of your monthly outgoings, you’ll most likely forget about it (this is good thing for investing). You’ll be pleasantly surprised by how quickly this pot will grow.

And rather than have investments, ISAs and pension funds scattered around in different places, why not look to consolidate some of these where appropriate? Investment platforms offer a great way to hold different products in one place whilst still being able to diversify into different assets.

One login. One statement. Easier to track progress. Simpler to manage.

Let technology do the work for you wherever possible (consolidation should be considered carefully – there are sometimes good reasons to keep existing products).

Help is on hand

These rules are very simple, but aren’t always easy to apply (life has a habit of getting in the way).

But it’s important that you try. After all, money itself is simply a means to an end. Creating a life and future you really want rarely happens by accident.

There’s never a bad time to start being more intentional about planning for your future. Get in touch today to find out how we can help you plan your path to financial security (and keep you on it).

Simon

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.