Eight tips for first-time Isa investors

Adrian Lowcock, investment director at Architas, sets out some of his top tips on how to invest for the first time. Plus, we show where to find further Isa and investing information on Moneywise.co.uk.

1. Know why you are investing

Before you start investing you need to set a clear goal of what you want to achieve. Deciding what you want will help you determine the level of risk you can take and what investments might suit you.

Further reading: Setting investment goals and How stocks and shares Isas can be used to grow your money at every life stage

2. What is your attitude to risk

Your attitude to risk is quite personal and it will change. Age, lifestyle and surroundings can all contribute. The amount of risk you should be taking also depends on why you are investing and for how long. A simple measure is you shouldn’t be having sleepless nights over concerns of an investment falling in value.

Further reading: What is investment risk?

3. Do your research

It is important to do your homework. Take some time reading up about the different types of asset classes, the benefits of Isas, and different types of investment styles. Consider what you want from your investments and how each asset class, fund style, etc. fits in with your objectives.

Further reading: Having a range of eggs in your basket and What asset classes should I invest in?

4. Set yourself an asset model

An asset model is the proportion of your portfolio you wish to hold in each type of asset class. This model can then be used as a reference point so you can check how far your portfolio has moved from your original investments.

Few investors actually do this, but it is a good way to manage your investments and ensure that they continue to meet your objectives and risks. It can also be used to identify areas from which to take a profit or those that need extra investment.

Further reading: Moneywise has put together sample portfolios based on our First 50 Funds list that you can use as a basis for investing:

Turn First 50 Funds into a potent portfolio and Easy tracker fund portfolios

5. Picking the right investments

Different investments have different characteristics and risks; for example individual shares and bonds offer significant potential but can be volatile and require a lot of knowledge, time, and indeed experience. Unit Trusts and Investment Trusts offer a broader investment and an investment manager with significant experience to make the underlying investment decisions for you.

Further reading: Moneywise’s First 50 Funds for beginners and Investment trusts: the City’s best kept secret

6. Choosing the right fund

There are far too many funds for a beginner to know where to start. Fortunately there are tools and services which can help reduce the list. Review fund recommendations and preference lists to find funds in the area you are looking for which the experts like. 

Further reading: Seven most recommended funds from 10 investment platforms.

7. Finding the right investment service

As a self-investor there are a number of choices in this market. There are several important factors to consider; costs, service, and jargon are top of my list. Costs, for example, have a direct impact on the performance of your investments. Watch out for hidden fees, such as exit charges.

Further reading: How to cut the costs of investing and Our guide to the best investment platforms for beginners

8. Avoid taxes, use your Isa

Taxes are another cost to the portfolio taken out of any profits you make. But there are ways to minimise the tax you pay on your investments. Investments held in an Isa will not incur any capital gains tax (CGT) on capital growth, nor is there further tax to pay on any income earned.

You get a new Isa allowance each tax year. In the current tax year (2016/2017) you can invest up to £15,240 within an Isa.

Further reading: A guide to stocks and shares Isas

Published: 13 March 2017
Last updated: 13 March 2017

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