If you want to make sure your money is working as hard as it possibly can for you, you’ll need to look at ways you can give your investments a boost.
Fortunately, there are plenty of things you can do to help maximise returns.
Protect returns from the taxman
You can shelter your cash and investments from tax by holding them in a tax-efficient individual savings account (ISA). This tax year, which ends on April 5, you can invest up to £20,000 in ISAs, either in cash, investments or peer-to-peer lending through an innovative finance ISA. Alternatively, you can invest in a combination of these if you want to. The annual ISA allowance will stay at £20,000 next tax year, so if you and a partner or spouse each use your allowances this year and next, you could shelter £80,000 from tax between you.
Keep an eye on charges
Investing doesn’t have to be expensive, so make sure you know exactly how much you’re handing over in charges each year. Danny Cox, of independent financial advisers (IFAs) Hargreaves Lansdown, said: “The cost of investing has fallen over the last 20 years, so £1,000 invested in a simple UK tracker fund today can cost only around £5 a year. If you have older investments or pensions its worth seeing if you are paying over the odds. Modern versions offer considerably more for less, including mobile access and greater choice. Be careful when you switch in case there are penalties for doing so.”
Diversify your portfolio
Piling all your money into one fund is a very risky approach, and you should never keep all your eggs in one basket. Spreading your cash across a range of different investments and geographical areas means that if one of these suffers poor performance, hopefully the others might do better and make up any losses. There are no guarantees, however, and with all investments, there is the chance you could get back less than you put in.
Think about your approach to risk
The greater the level of risk you’re prepared to accept, the higher the potential rewards, but remember any losses could be much bigger too. Mr Cox said: “The old adage goes that you need to speculate to accumulate and generally the more risk you take with your investments the better the longer-term returns. Most UK investors should have a good portfolio foothold in the UK and look overseas for some of their money for higher growth potential, particularly China and the emerging markets. The stock market rollercoaster will be bumpier on the way, but for over longer terms of 10 years plus you should be rewarded.” If you’re unsure where to invest, seek professional financial advice before proceeding.