Introduction

• I am an amateur investor and have been for a while under a year.
• I do not profess to being a master or having the perfect formulae to building your millions (sorry!) but I do think I’ve learnt some very important things in my short time investing and given the period of time I’ve been invested puts me in an excellent positon to give an honest & fresh perspective to help those first time investors take the plunge and get into investing.
• In this piece I aim to guide you through my 6 fundamental investment principles, based on my experience, and explain why they have been so important to me. I will then highlight the first steps I’d recommend related to investment vehicles. I will highlight some of the places I’ve invested however the fundamental aim is to cover the process and hints/tips for starting out. In a future piece I will talk in detail about the specific funds I’m currently investing in and looking to invest in. This blog will also be focused on stock market investment, I will be talking about other forms (Peer to Peer, current account, ISA etc) in a future piece.
• Before carrying on if you haven’t checked out my piece on Millennial Money Fundamentals I suggest starting there, it covers a lot of  groundwork built upon in this piece, you can find it here: http://jablifestyle.net/2016/04/30/millennial-money-fundamentals/.

My investment principles 

• Despite only having done this for a short time, I have already got a number of key principles; here are my most important 6 and why they are important to me:
• Have enough money to start investing 
  • Same principle as gambling, don’t risk anything when you can’t afford it. The stock market is a volatile and uncertain entity, before you invest any money ask yourself the question, ‘could I continue to live my life as normal without this money?’ Is the answer is no, then stop, focus on saving money or paying off debt and come back to stock market investment in a few months or years’ time
  • My recommendation is to have at least 3, preferably 4, months’ worth of your monthly costs saved up for an emergency in an easy access account before you start investing
  • Why important to me? I didn’t adhere to this principle when I first started to dabble in the stock market a few years ago, I put about £300 in a single company, I woke up 3 weeks later and the value had halved, I was a student at the time and had to eat baked beans and miss out on nights’ out for a number of weeks to re-coup that one. The good thing for me was I learnt the lesson early and without a major lose
• Diversify  
  • Don’t put all your eggs in one basket, it’s a very commonly heard cliché, but as ShayCarl said on a recent podcast; ‘The secrets of the world are hidden behind clichés.’
  • Have a mixture of higher and lower risk assets and across a number of different asset classes. This can be achieved in a number of different ways. Even be achieved in a single fund (i.e. with Nutmeg) or by holding multiple different funds of different degrees of risk
  • Having multiple funds doesn’t necessarily mean you have diversification. You could have 3 funds and the contents of each is 90% the same which provides no real diversification. Make sure you look at the granular level of the funds and ensure you have real diversification.
  • Why important to me? I haven’t been bitten badly by a lack of diversification personally, but have read a number of pieces by people who have, I don’t want to be  yet any person who gets caught up in a bubble, puts all their eggs in one basket and ends up with nothing.
• Don’t check your investments on a daily or weekly basis 
  • Watching your hard earned cash go up and down like a yo-yo is a horrible feeling, and makes you much more likely of pull out your money and pile it back under your bed. I check my all my accounts on a Monthly basis on the second week of each month., that is definitely often enough
  • Why important to me? I was in the habit of checking my investment accounts on a weekly if not daily basis, I strongly suggest you don’t! It got me so stressed and made me constantly want to take my money off the month. Whilst checking on a monthly basis doesn’t remove this completely it makes a considerable difference.
• Know what you want your end point to be 
  • If you are looking to build your wealth over a long period the investment decisions you are going to make a very different to if you have a large sum that you are looking to use in 1 or 2 years times. If you don’t have a clue idea of the end point you’ll end up making the wrong decisions. As a rule of thumb, the longer your money is invested, the greater the calculated risks you can take.
  • Why important to me? There are literally thousands of different options available to investors, knowing my end game managed to remove at least 70% of this and allowed me to focus on the important ones for me. This is linked to my piece called Paradox of Options, check it out here: http://jablifestyle.net/2016/05/07/paradox-of-options/
• Keep costs as low as possible 
  • I’ve made this ‘as low as possible’ not simply ‘low’ because sometimes you can get more value from spending a little more. However, initially, you don’t want to be paying fees a lot greater that 0.5%, remember it’s your profit that is being lost to someone else the higher the fee you pay.
  • Why important to me? Again, this is one I’ve picked up without being burnt personally. I read many articles and warnings from people who have seen a solid 4% return reduced to less than 1% by fund management fees….consider yourself warned.
• Only invest in individuals shares of companies/industries that you have A CONSIDERABLE amount of knowledge in
  • People are paid an incredible amount of money to find undervalued companies and invest in them, and they do it as a full time job, and most still fail! If you are a part time investor you don’t have a chance, unless one or both of the following a true; (1) You have a CONSIDERABLE amount of knowledge about a specific company, either because you work from them or you previously did, or you have a passion for that company (2) You get them at a discount. My company encourages employees to get shares with the firm by offering at 15% discount (pre-tax), as long as the company isn’t expected to tank, this is pretty much free money
  • Why important to me? The only individual shares  I have are with the firm I work for, I know I’m not smart (or lucky) enough to play the stock pickers market, yet.

So, Where to start? 

• Now I’ve outlined the principles and the key things to remember and consider now it’s time to really get stuck in, how to get started.
• Nutmeg – is an excellent place to start, especially for those younger first time investors who are ‘tech savy’ and used to engaging with their money electronically. I have a Stocks & Shares ISA with Nutmeg. When you sign-up you complete a short survey which assesses your threshold for risk, and puts you on a spectrum of 1 to 10, 1 meaning you are very risk adverse, 10 meaning you are very risk loving. This is a very simple way to understand what your comfort level is and Nutmeg will invest your money in the way that best reflects your personal preference to risk. Alongside this there are a few more key reasons why I think Nutmeg is an excellent place to start for a first time investor;
  • Low barriers to entry  – the minimum deposit is £1000. Realistically investing anything else than this is probably not optimal and many other places require a lot more for minimum investment.
  • Low charges – Nutmeg charges a flat rate for investment, the exact figure depends on how much you invest, but ranges from 0.3% – 1% (including VAT)
  • Easy access & usability – As I highlighted earlier this is an online investment tool meaning you have 24×7 access on website, which is very easy to understand and use. There is also a live  chat and phone support  Monday-Friday 9am-5:30pm if you do need to speak to someone.
• Nutmeg is the place I started my investment life and I would highly recommend it. Once I became comfortable with Nutmeg and the fact that I could lose money and not just gain it I started to diversify and look at the other options.

What next? 

• My next move – and one I’d suggest – was to choose a direct-to-customer investment platform. For a first time investor – especially for a young one who probably doesn’t have a huge fund to invest – these are great vehicles to use. They are fundamentally investment supermarkets that give you access to hundreds of different funds to meet the needs of every type of investor. The three main platforms I considered were; Hargreaves & Lansdown, Charles Stanley & BestInvest. To be honest, they are all very similar so I suggest checking out their sites and seeing which one you prefer the look & feel of, and go with that one. I personally choose Hargreaves & Lansdown.
• Once you have an account created it’s time to start investigating and deciding which funds you want to invest in. Hargreaves & Lansdown sent me their ‘The Wealth 150 Report’ which details over 700 funds available as well as providing fund manager comment & insight.
• Those are the first two steps I’d suggest taking if you want to be a first time investor. The aim of this piece is not to tell you exactly where you should be investing, I’ll save those nougats of gold for a post in the future!

 

Conclusion 

• Investment in Stock Market can be a very daunting and scary venture, but it doesn’t
  have to be. Above I have highlighted the key things to consider and a simple plan to follow to get set up.
• To do the above you do not need a massive budget or a lot of knowledge, you definitely don’t need to spend a large amount of money on a Personal Advisor. That does not mean no-one needs an Investment Advisor, if you have a large amount of money to invest or have very specific requirements then one might be the best option, however if you are a young individual looking to dip their toe in take the effort time – and save the money – by doing it yourself, you will learn so much from the experience.
• Good luck & if you make your millions remember you gave you the all important advice…..

 

Disclaimer: I am not a professional money adviser and do not claim to be. I am sharing the advice, hints and tips that have worked for me and I believe can work for you. Any money you do invest is at risk and you may be back less than you invested. 

 

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