January is the perfect time to take stock of your finances. In the wake of the holiday season, it is a chance to set new budgets, pay down debt, and rearrange investment portfolios in line with your New Year’s resolutions.
If you have resolved to be a more active investor this year, there is no time like the present. The US and UK stock markets have had a strong start to the year, and once-niche investments such as Bitcoin and peer to peer lending have started to go mainstream.
So, we’ve put together five ways in which anyone can become a more active investor in 2018. Let this be the year you finally take control of your finances.
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1. Make your ISA work harder
Individual Savings Accounts (ISAs) allow all UK taxpayers to save and invest their money tax-free, but not everyone is taking full advantage of the opportunities they present.
According to the most recent HMRC statistics, there were only 8.48m Cash ISAs open in 2016/17, 2.59m Stocks and Shares ISAs, and just 2,000 Innovative Finance ISAs.
Given that there are an estimated 30.3m taxpayers in the UK, this means that only two thirds of taxpayers are using their ISA allowance.
The current ISA limit is £20,000, and this can be invested across stocks, shares, funds, trusts, bonds, cash, and alternative finance.
Bearing this in mind, it is worth reviewing our portfolio and see if any of your existing investments could be made through an ISA wrapper instead.
If you are married, make sure your spouse is also using their full allowance and you could essentially double your annual returns.
Then at the end of the tax year (5 April 2018), shop around to see if you can get a better ISA rate from another provider, then set up a monthly direct debit and save as much as you can afford in 2018.
2. Revisit your risk profile
As you get older your appetite for risk changes, so it is important to take some time at the beginning of each year to ensure that you are still comfortable with your investment portfolio.
This may mean reducing your exposure to high-risk, high-reward areas such as hedge funds, emerging markets or private equity.
Instead, you might want to increase your allocations into lower-risk asset classes such as government bonds.
3. Set calendar reminders for corporate results
Any stocks and shares portfolio requires constant vigilance. Shares can go up and down at a moment’s notice, and investors who can act (and react) quickly could benefit from these market movements.
You can anticipate share price changes by looking at upcoming corporate events and quarterly or annual results.
Add calendar alerts for these dates, and keep an eye on the financial pages for any hints as to the expected performance.
By spending just a few minutes each quarter reviewing your corporate investments, you can become a much more knowledgeable and profitable investor.
4. Use fintech
Millennials have been using fintech to out-invest baby-boomers, with a recent report claiming that a massive 59 per cent of under-35s use technology and automated services to guide their finances, compared with just 40 per cent of over-35s.
There is a plethora of fintech options out there which can help you become a more active investor.
As well as all the usual banking apps and accounting software, look out for budget-trackers, online wallets, robo-advisors, and auto-investing tools.
5. Read more
Knowledge is everything when it comes to finance – after all, the more you know, the better choices you can make.
Make a habit of reading the financial press, as well as any relevant blogs and reports.
There are some great finance podcasts out there which will help you to stay up to date with the latest terminology and trends, and you can listen to them while you drive, walk the dog, or do the washing up.
Follow financial journalists, economists, and investment managers on Twitter and you will soon absorb some of their wisdom!Last updated: January 17th, 2018