7 steps for a new year money makeover

Organising your savings and investments should be a priority in the new year

1. What are your goals?

Over time your circumstances will change so it’s important to constantly look at your aims and see if they still hold true, writes SHARES magazine. For example, university fees, saving for a house deposit or retirement will all be needed at different stages of life, so prioritise them accordingly. Decide what you want and how long you need to achieve them. Which are non-negotiable and which may you be able to live without? Even savers who are part way through an investing programme should review their goals from time to time.

2. How much risk are you able to take?

Your investment time horizon and expected future earnings are both important when deciding how much risk to take. It may be unwise for a saver approaching retirement to jeopardise everything for a little bit of extra income in the future. Those saving for longer-term targets may be able to invest more of their assets in riskier products like equities.

What type of investor are you? Click here to find out.

3. What’s the most attractive way to invest?

Individual Savings Accounts (ISAs) are a good way to save and so are products such as pensions, either self-invested (SIPPs) or direct through a pension product provider. Each has different features and choosing the right ones will dramatically improve your chances of hitting your goals. Fee differences between different providers are another important consideration which can have a big impact on returns over time. Try and work out which are the best options based on how you expect to invest.

4. DIY or not?

Independent financial advice can be costly but may be worth paying if you aren’t confident. Will you invest in stocks and shares or use investment funds? How much do you expect to make from your investments? Always consider the worst case scenario and whether you can afford to live if all your investments didn’t make a profit.

What type of investor are you? Click here to find out.

5. Make a plan.

Once you’ve chosen your products and investment platforms, it’s time to set up your account and build a portfolio. Transfer the amount of savings you’ve budgeted into your account each month or quarter and try to keep transaction fees down by investing only when the balance reaches a certain level.

6. Don’t go all in.

Savers transferring a lump sum into an investment account for the first time might benefit from cost averaging, rather than investing it into the markets all at once. Instead of investing the whole amount on day one, cost averaging involves feeding the funds into the market gradually, either on a monthly or quarterly basis. Regular monthly savings plans can also provide the benefits of pound cost averaging. This helps you to buy more shares when the market falls and fewer when it rises.

7. Review your progress.

Revisit your plan and progress every six or 12 months to make sure you’re on track. As investments move up and down, the proportion of your investments in shares, bonds and other assets will change. If this is the case and you want to keep the original mix, consider rebalancing the portfolio through buying and selling the assets which have risen and fallen.

What type of investor are you? Click here to find out.

---

Please note the value of investments, and any income from them can go down as well as up and you may not get back your original investment. AJ Bell Youinvest do not offer advice about the suitability of their products or any investments held within them. Should you require financial advice you should consult a suitably qualified financial adviser. Tax rules can change in the future and the tax treatment depends on your personal circumstances. Past performance is not a guide to future performance and some investments need to be held for the long term.

 

AJ Bell is authorised and regulated by the Financial Conduct Authority. The Evening Standard is not responsible for the content of this advertisement feature and any queries should be directed to AJ Bell.