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How to maximise your investment returns?

Want to boost your investment journey? Here are some tips to help you maximise your potential investment returns.
How to maximise your investment returns?
Reading time: 5 mins

If you want to build up a nest egg for the future, investing could be a great place to start. But entering the investment world is just the first step of your (long) journey. As an investor, it’s important to ensure you’re doing everything in your power to maximise your potential returns. Here are some nifty tips to help you boost your investment plan.

 

Consider investing tax-efficiently with a Stocks and Shares ISA
If you currently hold investments that earn you money, you may need to pay tax. Put simply, the government could be taking a portion of your potential returns. So, if you want to make the most of your journey, it could be worth finding ways to minimise the impact of tax on your investments. The good news, for UK residents, is that it’s possible to remove tax from the equation. In 1999, the UK government introduced Stocks and Shares ISAs to encourage Brits to invest. The main benefit of Stocks and Shares ISAs is that they let you invest tax-efficiently.

What does it mean, you ask? Simply put, it means that you won’t need to pay UK tax on any money you make and as a result, you get to keep more of your returns. One thing to keep in mind though is that Stocks and Shares ISAs come with an annual allowance. Currently, the maximum amount you can pay into a Stocks and Shares ISA is £20,000 (subject to change), and every year, you have until midnight on the 5th April to use your allowance and make the most of it.

Opening a Stocks and Shares ISA is easier than you might think. With digital investment services, such as Wealthify, you can get started with just a few taps. All you need to do is choose how much you want to invest and the risk level that suits you. We’ll do the rest - from building your Stocks and Shares ISA to adjusting it to keep your investments on track. Also, if you’re looking to do your bit for the future, you can opt for an Ethical Stocks and Shares ISA. That way, your money can work tax-efficiently whilst supporting companies that have a positive impact on the environment and society.

 

Keep an eye on your investment fees
Whether you pick your own investments or use an investment service that does it all for you, there’ll be fees and charges to pay. Typically, a percentage of your total investment will be deducted either monthly, quarterly, semi-annually, or annually. In other words, fees will be eating into your returns so, it’s important to try and keep them to a minimum. How do you do this? Well, a good way to keep fees low is to shop around and compare charges from different investment services. But comparisons should be made between similar services. If you’re investing on your own, using a DIY investment platform, compare the options available like for like and consider things such as account fees and fund charges. Similarly, if you’re choosing a robo-investing service where the hard work is done for you, make sure you compare their management fees. Looking for the cheapest fees is a sensible thing to do to help maximise your potential returns, but don’t forget to look at the entire package. Things like customer service and investment strategy should also be considered when choosing your investment provider.

 

Make sure you diversify your investment portfolio
Investing can be risky, there’s no denying it, but there are ways to mitigate risk and maximise the potential growth of your investments. One thing you could do to minimise losses and give your money the best chance to grow is diversify. By spreading your money across regions and investment types (e.g. shares, bonds, commodities, property), the likelihood of losing everything would typically decrease, since poorly performing investments could be balanced out by others doing well. If you don’t diversify and invest all your money in one or two shares, you’d be taking a considerable risk. Indeed, if the few investments you’re holding are doing poorly, you could be losing all your eggs and wave goodbye to any positive return. Diversifying can be time-consuming, there’s no denying it. But you don’t have to do it yourself. Online investment services, such as Wealthify, will do the hard work and create you a diversified portfolio with just the right mix of investments.

 

Make adjustments to your investment plan when needed
When you invest, it’s always a good idea to keep an eye on what’s happening in the world as political and economic events could affect the performance of your investment plan. By staying alert, you have the possibility to stay ahead of the game and make adjustments to try and lessen the impact of potentially disruptive events on your investments.

In the world of investing, we talk about rebalancing. For instance, if you’re primarily investing in UK shares, it could be worth changing the focus of your plan and investing in other regions as Brexit approaches. Making changes to your plan can be tricky though as it requires extensive knowledge, research, and analysis. But don’t worry, if you don’t feel confident enough to do it yourself, there are many robo-investing platforms, like Wealthify, that’ll do the investing and rebalancing for you.

 

Remain invested over the long-term
If you want to maximise your potential returns, it’s important to remain invested over the long-term. Holding onto your investments for a number of years, regardless of market fluctuations, could help increase your chances of making a positive return. For example, people who invested for any 10-year period between 1986 and August 2019 have had an 89% chance of making a gain – and this time frame is known for its many market crashes, like Black Monday in 1987 and the Global Financial Crisis of 20081. So, as you’re investing, try to be patient and let time work its magic.

 

1: Data from Bloomberg

 

The tax treatment depends on your individual circumstances and maybe subject to change in the future.

 

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

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