As a recent newcomer to the delights of retail investor trading in both UK ad US stocks and shares, I’m delighted to welcome some insights today from the founder of low-cost wealth manager, InvestEngine. No doubt you’ve heard the hype surrounding the so-called meme stocks and shares like CCIV, AMC, Gamestop (GME) and Clover (CLOV) etc? These have hit the headlines more frequently since the January and June spikes in share prices brought in more retail investor interest. To offer his thoughts on the current craze, Simon Crookall, previously co-founder of Gumtree, has kindly set out some helpful tips for better investing that he has shared with us. If you like the insights, be sure to check out the £50 free welcome bonus for those opening an account and funding a £100 investment portfolio for stocks, shares and ETFs.
So whether you’re a seasoned investor, or new to the arena, please read on for thoughts and insights into investing in the UK, US and beyond in 2021 and 2022.
6 tips for better investing from InvestEngine
InvestEngine been kind enough to share his thoughts on tips for better investing. As a new retail investor learning how to negotiate the perils and pit falls of investing, Simon’s tips act as a good summary of my experiences so far.
Set some goals
Do you have a specific aim in mind, like a deposit for a house or a retirement nest-egg? Or are you just looking to grow your savings as much as possible? Working out your investment goal is a good way to start your investing journey and to provide some discipline to stay the course — especially when stock markets get rocky.
Don’t be a fashion victim!
Beware of getting swept up by investment novelty and fads — investment crazes come and go, and by the time you’re on board the big gains may have already been made. Ask yourself whether you really believe that latest investment “opportunity” will continue to deliver, or could it be a bubble waiting to burst?
Know your risk appetite
High-risk investments can crash just as quickly as they rise — could you stomach substantial losses over a very short period of time? Would worrying about big losses keep you from sleeping at night? Invest at a risk level you feel comfortable with.
Spread your bets — having some of your money in volatile individual stocks and assets may be reasonable, but balance that with more traditional investments. Diversifying your investments helps reduce risk and smooth returns — you’re not over-exposed if a single holding crashes, nor are you depending on just one share or investment coming good.
The reality is that in the short-term stock markets are pretty much as likely to fall as to rise. But with a properly diversified portfolio, the longer you invest for, the more chance you have of gaining overall — and beating cash returns. It’s why investing should be seen as a long game.
Don’t be a DIY disaster!
Many investors like the challenge and excitement they get from DIY investing, but it isn’t for everyone. Having a professional investment manager build and look after your portfolio can be a good way to control your investing emotions — whether being swept up in the latest investment craze, or panicking and selling in falling markets.
InvestEngine founder Simon Crookall says: “Having an investment goal should help you put together a suitable investment plan for actually getting there. Of course, we don’t all have a specific investment aim, but even if it’s just to grow your savings as much as possible, that objective should help you think about what risks you’re prepared to take.”
“The rise of free trading apps has made it all too easy for individuals to get caught up in the hype of high-risk investing. If you need some help finding the right level of risk for you, consider an investment service like InvestEngine which has a free-to-use online tool that will suggest an appropriate managed portfolio.”
The increase in investing
“Britons have squirrelled away £150bn or more in savings accounts during the pandemic — £5,000 per household on average. For those who don’t need to keep this cash on hand — or plan to spend it — investment could certainly be worth considering.”
“Many people are holding much of their savings in cash and relatively little in stock market investments. With interest rates on the floor, and being outpaced by inflation — savers should consider investing in the stock market for the chance to earn a worthwhile return on their money.”
“The surge in sign-ups to trading apps during the pandemic has shown that people are prepared to put their money in the stock market even in a time of uncertainty. However, this trend has also increased the number of inexperienced investors, unwittingly taking on too much risk and placing too much emphasis on individual shares.”
“ESG has also been a big growth area — in terms of ETF and other product launches by the investment industry as well as increased sensitivity and interest in such issues among investors. All the signs are that this growth will continue. Thematic ETFs covering areas like robotics have been popular too.”
GameStop GME, AMC and stockmarket frenzies
“The recent frenzy around GameStop, a hyped-up US retailer, showed how inexperienced savers can get drawn into the stock market via free trading apps, buying individual stocks and just hoping for the best. This is a risky approach to investing — we’d urge people tempted by such opportunities to consider their own situation and build diversified, long-term portfolios rather than chasing speculative bets. Many people need more guidance on risk and how to create and manage a diversified portfolio, rather than just diving headlong into what can be very choppy waters.”
“Currently, few DIY trading apps provide the tools for effective portfolio management. We think there’s a huge gap in the market waiting to be filled by a new generation of more risk-conscious investment platforms. This is why we have developed InvestEngine DIY – helping investors take control, build more appropriate portfolios and simplify their long-term investing.”
The accessibility of an app, the reassurance of a professional investment manager — a sweet spot for many looking for tips for better retail investing?
“Recent speculative frenzies come against a backdrop of fears about a possible market correction. Some individuals may feel confident enough to navigate the continuing market uncertainty as DIY investors. Others might benefit — and sleep easier — by investing in a diversified portfolio with a professional manager.”
“Not all investment apps are the same — for many newbies, the sweet spot may lie in the readily available combination of digital accessibility and a professional manager behind the screen looking after your money.”
“A diversified, professionally managed portfolio can offer a helpful discipline for investors. You get the opportunity for stockmarket returns at a time when cash is paying virtually nothing, without the level of risk of speculating in single stocks. An experienced investment manager is also less likely to panic if markets fall, helping you stay invested for recovery and focused on achieving attractive long-term returns.”
“We hear too much about the costs of using an investment manager and not enough about the benefits. For many people, having a professional manager, such as InvestEngine, who builds and looks after a diversified portfolio can be a good way to control investing emotions — whether being swept up in the hype of hot stocks, or panicking when markets fall and crystallising losses.”
Regulator warns about high-risk investments
”Recent research by the FCA highlighted the dangers of high-risk investments like cryptocurrencies and foreign exchange, which inexperienced younger investors may be accessing with investment apps. We applaud the FCA for highlighting these concerns — while it’s great that more young people are turning to investing to build their wealth, it’s clear many individuals don’t understand the risks they’re taking.”
“It’s also crucial to appreciate that not all investment apps are equal. Here at InvestEngine our focus is on helping investors build portfolios that suit their attitude to risk, using traditional asset classes only — for an annual management fee of just 0.25%. Investors are welcome to try our straightforward risk questionnaire to find a managed portfolio that could suit them.”
“As well as offering managed portfolios, we also offer a commission-free DIY investing service with education and portfolio best-practice at its core. Our aim is to help investors find a better risk-reward balance for their money.”
Quotes: Please note quotes and tips for better investing in this article are courtesy of Simon Crookall, founder of low-cost wealth manager InvestEngine. Simon is a highly experienced digital entrepreneur and wealth manager who previously co-founded Gumtree, the classified ads website. He is also a director of long-established investment manager Ramsey Crookall.
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Launched in May 2019, InvestEngine was started by Simon Crookall, previously co-founder of Gumtree, the classified ads website. As well as being a highly experienced digital entrepreneur, Simon is also a director of investment manager Ramsey Crookall.