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Persistent high inflation – particularly in food and energy prices – has impacted us all, while market volatility caused by wider global uncertainty, made for a difficult 2022 for investors. With higher prices looking set to remain and a number of factors that could result in ongoing market uncertainty in the coming months, we set out tips to get the most from your investments and keep you on track to meet your long-term financial goals.

Money management and planning for your financial future

With the domestic economy likely to fall into recession during 2023, staying on top of your spending remains more important than ever.

We are all feeling the pinch of inflation. As well as making goods more expensive in the short term, it means the money we put into cash savings accounts tends to lose its real value over time. No cash account currently offers interest greater than the consumer price index (CPI) of inflation, which rose by 10.7% in the 12 months to the end of November 2022.

So, those that can afford it may want to consider continuing with regular contributions to their investments when making financial plans for the future. While past performance is no guide to future returns, the longer you hold stocks and shares then the more likely your investments will deliver positive returns, despite bouts of short-term volatility.

Resolving to practise good money management in 2023 will help make it possible to invest in pensions and ISAs for the long term. We hope that the investment tips below will assist you in making a plan for the year ahead and keeping you on track to reach your financial goals.

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Seven investment tips for 2023

1. Set financial goals

Most of us find it easier to put money away when it is for a specific purpose – perhaps to spend on a holiday or a car – but investing towards a less defined target, such as ‘a comfortable retirement’ or ‘to help the children’, is often far more difficult.

A recent study from Stirling Management School showed that those who set goals with their money are more successful when it comes to both saving and investing.

The study recommends setting an end date and target figure for each of your goals, as well as using free online resources or targeted financial advice to improve your financial literacy.

Remember, Nutmeg’s experts are on hand to offer financial guidance, and you can book a free call today to help you set up your investments to achieve your financial goals. They can also help you to understand if our paid for, restricted financial planning service can help create a plan that’s right for you.

Read more: Five steps for staying financially savvy

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2. Get your finances in order

It can be hard to plan to put money away if you do not know how much you have and how much you are spending.

Making a budget and a financial planning checklist will help you see where your money is going and ensure your financial goals are realistic.

Technology can make this easier. For example your banking app might allow you to view other financial products, such as credit cards, mortgages or investments, alongside your current account and savings pots. This will give you a fuller picture of your budget in one place.

Equally, you could use standalone apps such as Emma or Money Dashboard, which let you see your income and outgoings in the same place. Be aware that not all budgeting tools can connect to your investment accounts.

If you prefer, you can use your bank statements and credit card bills and create a spreadsheet to see what is coming in and going out. The rise in popularity of budgeting in recent years, has also led to rise in ready made spreadsheets and paper forms you can buy. Some banks, such as our colleagues at Chase, offer a built in budgeting tool to help you to better track and manage your monthly spend.

You may find that you are spending money you don’t need on subscriptions, memberships or unnecessary shopping. A financial ‘detox’, where you cut out surplus spending, could help you find the cash to fund long-term investments.

Read more: The accounts you need in your financial life

3. Use tax free allowances

The government rarely gives anything away for nothing, but the ability to invest money into a stocks and shares ISA or pension without paying tax on growth or returns – and in some cases even getting back the tax you’ve already paid – is worth making the most of.

In the case of your pension, the government will add back 20% relief automatically if you are a basic-rate taxpayer. If you pay higher-rate tax you can claim 40% relief through your tax return. Additional-rate taxpayers can claim 45%.

There are other instances where tax must be considered. For example, if you are looking to sell something for a profit, such as a property, a family heirloom or a business asset, you may have to pay capital gains tax after your annual allowance is factored in.

If you’re unsure of the allowances you have available or how best to maximise these, a call with a member of our wealth services team could help.

Read more: How to reduce Capital Gains Tax in 2022

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4. Consider consolidating your pension pots

With most of us having several jobs during our careers, the chances are that we will retire with pensions in many different places.

These can be hard to keep track of and might make it more difficult to work out how much money you might have in retirement. You might want to consider consolidating them by transferring to a single provider, so you can see them all in one place. In some cases, this may be cheaper in terms of what you are charged.

Before you transfer pensions it is vital to check they do not have any guarantees attached to them. Some pension types might guarantee a particular annuity rate or level of income and such guarantees can be valuable. Seek advice if you are unsure.

Read more: A guide to tracing, consolidating and transferring your pensions

5. Embrace compounding

Einstein is said to have called compounding “the eighth wonder of the world”, and if you are investing over a long period of time it can certainly have a wonderful effect on your money.

Compounding means that when you earn interest or returns on your assets, these returns then begin to accrue gains for themselves, creating a snowball effect that increases your wealth over time.

This empowers investors in that starting as early as possible for a long-term goal can have a significant impact further down the line. So even if times are tough, remember compounding, and if your financial circumstances allow, try to put away something for the future, so it can grow over time.

Nutmeg’s compound calculator can help you to see the impact of compounding on your investments.

Read more: The power of compound returns

6. Don’t panic: investing is for the long term

The course of investment does not always run smooth, and while it is tempting to log in on a daily basis during times of volatility, it is worth referring back to your long-term financial plan.

Fluctuating prices is a natural part of investing. Try to take a long-term view and if you don’t need the money in the short term, your goals and timeframe haven’t changed, then try to resist the temptation to sell investments on if the market is low – you will lock in losses that could be recovered later. Instead, focus on your long-term goals and how you will meet them.

Monthly investing can help smooth out the performance of investments as you may buy more units or shares when the market is low and fewer when the market is high. This concept of ‘drip feeding’ into your investments is known as pound cost averaging.

Read moreThe four rules of investing everyone can rely on

7. Diversify your investments

The saying ‘don’t put all of your eggs in one basket’ has stood the test of time for a reason – spreading your money across different investments makes for a less bumpy ride.

Those with the most resilient finances ensure they have a mix of assets – some money in cash for emergencies, as well as investments for the long term – but they also diversify within those assets.

Asset allocation means ensuring your investments include, say, bonds as well as shares and that the companies you invest in operate in different sectors of the economy, as well as different regions of the world. That way if one company fails or there are problems in a certain geography, your portfolio is cushioned from some of the downside.

Using multi-asset portfolios that invest across many different funds and are curated by experts, such as those provided by Nutmeg, can help to ensure you are well diversified without having to be an investment expert yourself.

Read more: What is diversification?

8. How to put these tips into practice

Putting all these resolutions into practice might seem daunting, but there is help available if you need it. Nutmeg’s life moments guide may be useful in determining how you may want to invest across the decades.

You can also book a free call to speak to a member of Nutmeg’s team of experts if you have any questions about making the most of your money in 2023.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future performance. Tax treatment depends on your individual circumstances and may be subject to change in the future. Please note that during any transfer, your investments will be out of the market. If you are unsure if investing is right for you, please seek financial advice.