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Five ways to be a Smart Investor

There are certain key traits which smart investors often possess. We look at five of these and explain how they may help you to achieve investment success.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.

What you’ll learn:

  • Why setting goals is important.
  • How keeping your emotions in check can help give your money the greatest chance to grow.
  • Where you can learn more about investing.

Lots of people are put off investing because they think it’s too involved, complicated and risky - or that it should simply be left to the ‘professionals’.

The chances are, however, that even if you’re new to investing, you already possess lots of the characteristics that smart investors have, and can use these skills to your advantage.

Below are five traits that every good investor needs. Please note, however, that Barclays Smart Investor does not offer personal investment advice. If you’re unsure about investing, you should seek independent advice. Investments can fall in value; you might lose money.

Learning

You don’t need a vast amount of existing investment knowledge to be a smart investor, but you should be curious about learning more and keen to further yourself.

That means being prepared to do plenty of research before you invest and ensuring your personal finances are in good shape before you take the plunge. Smart investors focus not only on which investments are most suitable for them based on their objectives and approach to risk, but then regularly monitor them to ensure they’re on track.

If you’re not sure how to get started, read our principles of investing which we believe cover the most important aspects of investing. These include making sure you’re ready to invest, establishing your objectives and reducing unnecessary risk, and staying invested.

Planning

Building a diversified portfolio may help even out market ups and downs and help you be prepared for any market volatility.

Spreading your money across a range of different asset types, including cash, fixed-interest investments, shares and property, reduces your overall level of risk as if some of your investments fall in value, hopefully others may rise to help offset any losses.

You can further diversify your portfolio by spreading your investments over several geographical areas, so that if markets are turbulent in one particular region, you may have investments elsewhere which may be outperforming. Funds can help you diversify and spread risk. These are collective investments, where your and other investors’ money is pooled together and spread across a wide range of underlying investments.

Some funds, known as multi-asset funds, invest in a range of asset classes rather than just one, with the fund manager responsible for finding the right balance between different assets.

Barclays Life Planner tool can project how your savings or investments could potentially perform in the future, helping you with your financial planning. Remember that these projections are only indicators however, and should not be taken as a guarantee of how your investments will perform. You might get back more or less than the projections that you see. If you’re not sure where to invest, you should seek professional financial advice.

Find out more about diversifying your investments

Discipline

Whether your goal is saving for retirement, funding education costs for your children, getting on the property ladder, or something completely different, knowing what you’re aiming for and how much you’ll need to get there, can help you stay on track. You’ll need to think carefully about your approach to risk, and whether you’re comfortable accepting higher risks in return for potentially higher rewards. Remember that taking on more risk does not guarantee you better returns however, and with all investments there is a chance you could get back less than you put in. If you’re not sure where to invest, seek professional advice.

Depending on your strategy and goals, you will also need to choose between those investments focused on producing an income stream, or those which are aimed at providing you with capital growth.

If you’re looking for a simple solution to building a diversified portfolio, ready-made investments are one option to consider. These are essentially funds which invest in a basket of different investments looked after by a professional fund manager. A choice of ready-made investments is usually offered to suit different attitudes to risk. However, while these may be a simple investment option, please bear in mind that this is not a recommendation to select ready-made funds. These are plenty of other options to build a diversified portfolio that may offer greater long-term returns.

Find out more about how our Ready-made Investments can help

Analysis

It’s important not to look at any one factor in isolation when choosing investments. Always consider the wider picture and find out as much as you can about a company or fund and how it is managed before investing.

Remember too that while it might be tempting to invest in a fund or company that has previously performed well, there are no guarantees that the same company or fund will go on to deliver positive return in years to come; the past performance of investments is not a reliable indicator of future returns. If you’re unsure where to invest, seek professional financial advice.

Patience

Investing should never be seen as a route to quick riches. Smart investors are patient, and prepared to tie up their money for at least five years, but preferably longer, in the hope that this will give their investments time to recover from any potential downturns. Although it’s natural to want out if you see your investments fall in value, it’s important to remember that staying invested over the long-term gives your money the greatest chance to grow, although there are no guarantees.

Remember that you don’t have to have a big lump sum available to get started. You can drip feed money slowly into investments over time if you want to. The advantage of doing this is not only that you develop a regular investing habit, but also that you buy more shares when prices are low, and fewer when they are higher. This can help smooth out volatility as you are effectively paying the average price over a fixed period.

Find out more about the benefits and drawbacks of making regular investments

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Before you start

Tempting as it may be to plunge straight into investing, you may need to address other aspects of your personal finances first. In this section, you'll learn more about some of the things you should take into consideration before putting your money to work.

Principles of investing

If you’re new to investing, knowing where to start can be a daunting task. Here, we guide you through your investment journey, from what to consider before you start, the different types of investment account, which might suit you, and the various asset classes. You’ll also learn why it’s important to focus on the long-term as an investor, and create a diversified portfolio, which includes a range of different investments.