Choosing to invest is a great way to grow your money. However, due to the risks involved, it’s important that you make well-educated decisions to avoid huge mistakes that could cost you thousands.

Some mistakes are easier to spot than others as they may have immediate consequences. But others may only show repercussions further down the line.

Here are our 10 Helpful Words of Wisdom to keep in mind when investing:

1. Don’t ignore inflation!

Not checking whether the interest rates on your savings account is below inflation can lead to the value of your money decreasing over time.
Therefore, you must pay attention to inflation and try to protect your money by investing it correctly.

2. Build up a contingency fund

Life is unpredictable, so having an emergency fund is always wise to help protect you (and your family) if something unfortunate happens. It also means that you won’t need to tap into your loans or investments if something goes wrong. A rough guide to go off is saving around six months’ worth of essential expenditure and to keep it in a savings account that you can access easily.

3. Don’t forget your tax allowances

Some accounts can be more tax-efficient than others such as an ISA or a pension. Any income put into an ISA is tax-free and therefore you can withdraw the money whenever you like without having to pay tax. Pensions, however, offer 20% tax relief on personal contributions. If you are a higher or additional rate taxpayer then you can claim further tax relief up to 20 and 25%.

4. Diversify your investment portfolio

It’s important to diversify your investment portfolio and not put all your eggs in one basket to help minimise your losses if one investment underperforms. This isn’t easy to do on your own, but financial advisors can help you.

5. Think long term

Stock markets are always changing. Whenever you invest, you should do so with a long-term mindset and be prepared to wait for a minimum of 5-years before seeing a greater return. This is because long-term investments give you a better chance to recover from stock market crashes and allow your money to grow in value.

6. Take your time

There is a great element of risk involved in investing; and therefore, if your stocks suddenly fall, it is important to remain calm, level-headed and to not make a quick detrimental decision that may be costly in the long run.

In these times of need, financial advisors will be the voice of reason and suggest the best foot forward for your situation.

7. It’s okay to take a loss

While it’s important to not make rash decisions, it is equally as important to not hold onto stocks that are underperforming with the hope they’ll recover. If one of your investment’s circumstances have changed, it could be wise to invest your money elsewhere to prevent you from losing out.

8. Make choices that work for you

Everyone’s motives for investing are different and when it comes to stocks, there is no one-shoe-fits-all approach to follow. You must make decisions that suit you, and not follow in the footsteps of friends and family whose wants may be different to yours.

If you’re ever in doubt, a financial advisor will keep your investment goals in mind and provide a helping hand by suggesting choices that will benefit you.

9. Don’t become too big for your boots

Investing isn’t easy; if it was, then everyone would be millionaires.

Always remember that as easy as it is for stocks to soar, it’s just as easy for them to fall (one stroke of luck doesn’t guarantee future success).

10. Pay attention to your past mistakes

Looking back on past mistakes can be difficult for anyone, including investors. But it’s important to take a lesson from any losses that have happened to avoid making the same mistake again.

To Conclude…

Investing can be a wonderful opportunity to help grow your money and build up a more secure future. However, there is always an element of risk involved and you are not guaranteed to get back what you’ve put in.

To make sure you confidently make the right investment decisions for you and your current circumstances, you should always contact a financial advisor.

Coffey Brooks are a team of Independent Financial and Mortgage Advisers based in Clacton-On-Sea, Essex and are directly authorised and regulated by the Financial Conduct Authority.