12 key saving and investing principles
On the 12th day of Christmas my planner gave to me… 12 investing principles! This may not seem like the most obvious gift, but there is thought behind it…
As we look ahead to 2025, it’s clear that the year could bring volatility to global markets. With geopolitical uncertainty, shifting leadership dynamics, and ongoing economic challenges, it’s natural to feel a sense of unease about what lies ahead.
However, it’s during times like these that the fundamentals of long-term investing become even more important. History has shown us time and again that markets recover, even from the most dramatic downturns. And because of the preparation we’ve done together, you’re already ready to face whatever comes next.
Liontrust: The history of long-term investing
Staying focused on your long-term goals, rather than short-term uncertainty in the markets, is the key to navigating 2025 with confidence. So here are 12 essential reminders to help you stay grounded, informed, and on track as we enter the new year.
1. Maintain the plan
It all starts with your plan. Thankfully, this is the fun bit.
It’s important to keep this aligned with what truly matters most to you. Do you want to work as little as possible? Provide for your children or grandchildren? Run away to Spain and leave all your responsibilities behind? Whatever it is, maintaining clarity around these wishes and what they mean to you are important throughout your time as a long-term investor. It’s this that will actually get you from A to B.
2. Check your risk tolerance
Your risk tolerance is usually dictated by your emotions, personality and experiences, rather than your age or financial situation. But tolerance to risk can change so it’s important to ensure it’s always aligned to your personal goals. This is something I’ll always check with you during reviews.
3. Practice smart diversification
It’s never a good idea to put all your eggs in one basket, whether you’re a cautious investor or the adventurous type.
Investing in funds, rather than individual stocks, is a great start, but you’ll also want to invest across different asset classes, countries and industries.
By building a diverse portfolio of investments, you can reduce volatility, manage risk and most importantly, protect your sanity.
4. Avoid timing the market
‘Buy low, sell high’ is sound advice in theory, but taking these words a little too literally can leave you worse off in the long run.
You might invest a large amount of money in a short space of time because you believe prices will rise.
You might avoid making new investments because you think we’re heading for a crash.
Whichever way you go, trying to time the market is unlikely to end well. What counts as high today, could be low tomorrow - and vice versa. So you’re better off investing on a consistent basis, regardless of what’s going on around you. It’s time IN the market that counts!
5. Don’t try to beat the market
No matter how hard you try, your chances of ‘beating the market’ (picking stocks that outperform the average) is slim. Everyone wants to find the next Apple or Netflix, but it’s impossible to know exactly which of today’s most affordable stocks will skyrocket over the next 10 to 20 years.
Even professional fund managers struggle to outperform the world’s biggest indexes, despite having endless resources at their fingertips. So don’t waste your time.
6. Invest often
The best way to build wealth is to start early. The next best way to build wealth is to do it often.
Making regular contributions brings multiple benefits. You won’t have to identify the perfect time to invest. You can turn it into a habit. And you’ll enter the market at a range of price points.
Some days you might pay a little more. Others you might pay a little less. It’ll usually average out in the long run. So regardless of when you got started, make sure you’re contributing throughout the year, rather than throwing the full £20k into your ISA on April 5th.
7. Manage your emotions
To manage your money, you need to manage your emotions. It’s much easier said than done, of course. Even the most level-headed people can make poor financial decisions when they let their emotions take the wheel.
If you’re excited when the markets are up and terrified when they’re down, remember that I’m only ever a phone call away.
8. Don’t get too involved
There’s no need to read The Financial Times every morning or check your portfolio every night. The markets will fluctuate from one day to the next. One good example of this is the so-called ‘Santa rally’. This is the ‘theory’ that markets always go up in December. US stock market data shows that of the 94 Decembers since 1930, 69 are positive - nearly three-quarters of all Decembers. This means you might get an inflated sense of what’s possible to achieve around this time.
However, it’s since been found that 95 observations really isn’t statistically significant enough to base an investment strategy around. It really is better to stick to the long-term plan. Allocating your capital to stock markets with a long-time horizon and letting capitalism do its thing is by far the better thing to do.
9. Avoid speculation
One of the biggest mistakes people make is changing their behaviour based on speculation, rather than facts.
In the months leading up to the Autumn Budget you probably heard rumours that Labour were planning to scrap the 25% tax-free lump sum. With so much hysteria and the threat of a higher tax bill, many over 55s withdrew 25% of their pension pots in a panic. In the end, Labour didn’t scrap the tax-free lump sum. And now that the fuss has died down, many of these savers are pleading with their pension providers to take the money back.
It’s so easy to get caught up in this type of thing. But remember that the news is designed to grab attention, but it’s often short sighted. Instead of reacting to every twist and turn, focus on the bigger picture. Investing is a long-term game, and short-term noise shouldn’t derail your strategy.
10. Focus on what you can control
You can’t control market movements, economic shifts, or global events, but you can control how you respond to them. Most of the time, the best response is no response.
If you’ve set clear goals, you’re saving and investing regularly, and you’re sticking to your plan, whatever’s happening ‘out there’ don’t let it concern you. In the unlikely event that it is in fact an issue for you, you’ll hear it from me.
11. Don’t forget to live
Money worries are usually complex and there’s not often an easy fix, but sometimes it can be helpful to stop thinking ahead and drag yourself into the here and now. Are your bills paid? Is your debt manageable? Have you made at least some progress towards your goals? If you answered yes to those questions, you can give yourself a pat on the back. Too often people so wrapped up in the numbers that they forget to actually live.
12. Don’t be a stranger
With so much information readily available, be it online or in the paper, it can be tempting to self-diagnose whenever a money problem arises. The last thing I want is for you to act on something that could leave you worse off in the long run. Remember, I’m only ever a phone call away. If there’s every anything you’re not sure about, or want to discuss, please get in touch.
As we move through 2025, it’s important to remember that uncertainty is nothing new - it’s part of the natural rhythm of investing. These 12 reminders are here to help you stay focused on what truly matters: your life and the carefully considered plan we’ve built together.
Throughout the year, I’ll be here to guide you, reminding you of these principles whenever the noise of the markets feels overwhelming. Together, we’ll navigate the challenges and seize the opportunities that arise, keeping your financial future on track.
Remember, investing isn’t about reacting to every twist and turn; it’s about staying the course and trusting the process.
I look forward to seeing you in 2025, until then, have a very Merry Christmas and a Happy New Year!