Top 5 Investment Habits to Take into 2024

Whatever your investment goals are, success doesn’t come overnight. Although investing can make the process of reaching these milestones much quicker, many assets perform best over a long-term period and can often deliver the biggest returns, especially if you have healthy investment habits.

Patience is a virtue, and it’s one of the most valuable investment habits if you’re looking to build serious wealth. That said, the most successful investors will have developed a collection of investment habits to keep their portfolio focused, diverse and most importantly, successful. But what exactly should you be taking into your investment plan in 2022?

Why is it important to change investment habits?

If you’re a seasoned investor, you might be thinking, ‘I’ve made it this far with my assets, why should I change my investment habits now?’, which is completely understandable. However, if you already have one or two investments, you’ll know how quickly markets can change, so it’s important to adapt and to review your investment patterns every so often.

If there was ever a good time to review your investment habits, it’s now. It’s safe to say that the UK seems to be over the worst of the pandemic, and with the majority of industries almost fully recovered, numerous markets are completely different to what they were just 18 months ago.

For example, the average UK property value increased by around £11,000 over the past 18 months, despite the fluctuation in inflation, mortgage rates and the Bank of England base rate. Combined with the pent-up demand that continues to impact the property markets, and exciting growth forecast for the next few years, investment habits are changing to reflect these new markets.

Have a Financial Plan with SMART Goals

More often than not, a solid financial plan can lay the foundations for a successful investment portfolio. Naturally, financial planning is the first stage of any investment journey, with the intention of identifying your motivations, investment assets and most importantly, your goals.

It’s crucial to know why you’re investing and what exactly motivates you. Having an idea of what you’re looking for out of your investments will usually make the following steps much easier, especially when it comes to choosing which asset(s) you want to invest in.

Once you’re at this point with your financial planning, you’ll be able to put some goals in place. When it comes to overall investment goals, the bigger the better. If you know how much you want to make and by when, you’ll be able to set smaller SMART goals in the meantime.

SMART stands for:

• Specific
• Measurable
• Achievable
• Realistic
• Timed

As a way of establishing motivations, assets and goals, financial planning is crucial, especially in 2024. With the changes in the market, this investment habit will encourage you to reconsider your milestones to determine what’s achievable and what isn’t.

Carry Out Your Own Research

Your investment portfolio is yours and yours only, so it’s important to make decisions based on your financial plan. This means that carrying out your own research is one of the most important investment habits to take into 2024.

When it comes to research, knowing where to start can be the most the challenging part, but there are a wealth of resources you can use to help you along your way:

• Investment books
• How-to-guides
• Webinars
• Podcasts
• YouTube videos
• Blogs
• Investment tools

It’s crucial to think about your financial goals and investment plan when carrying out your research, as it will often make it a lot easier. For example, if you know buy-to-let property can help you to achieve your financial goals, you can then use blogs and YouTube videos to discover emerging and established markets. Here, you’ll want to take into consideration rental yields and property prices.

From established city cores such as Birmingham and Manchester to emerging areas in the East Midlands, there are now a wealth of new considerations for investors. For those researching their first – or next – buy-to-let investment, our ‘Best Places to Invest in UK Property in 2024’ article can help investors navigate the world of property.

Once you have a better idea of where you want to invest, it’s often best to dive deeper into the area. Look specifically at tenant demand – does it have any universities? Does it retain/attract graduates and young professionals? Investment guides are usually the best resource for this as you’ll get an in-depth overview of the location, its amenities and tenant demand, as well as property forecasts.

Related: The Best Property Investment Books

Diversify Your Portfolio

Diversification is arguably one of – if not the – most important investment habits to have, and not just in 2024. Generally speaking, having a diverse portfolio means having a collection of different investment assets, all of which span individual markets and offer independent returns.

Diversification is not only good practice for investors, it is crucial for those looking to build a large, robust portfolio. Fundamentally, having multiple investments means having multiple streams of passive income, which is often the goal for investors. Although this can be achieved with just one asset type, diversifying with more than one means that you cover several different markets and therefore, benefit from their growth.

After the property value slump that took place during 2023, it’s safe to say that larger portfolios weather storms much better than smaller collections. With markets crashing and others booming, it highlighted the fragility of certain assets. As we head into 2024, even the richest investors are taking the opportunity to diversify their assets.

According to Knight Frank’s latest wealth report, Ultra-High Networth Individuals are looking to more stable markets, with residential property and luxury handbags set to fill portfolios in the coming years. While the Chanel Classic Single Flap is seeing price growth upwards of 50%, residential property also remains on an upward trajectory.

While it’s important to diversify your portfolio wherever and whenever you can, it’s even more important in 2024, especially for property investors. The UK market is still benefiting from the pandemic property boom, and with forecasts anticipating increases in both prices and rents, it’s the prime time to reap the rewards of a positive market and safeguard your portfolio.

Diversification can be achieved in a number of different ways, but when it comes to property, it’s simple. If you’re looking to safeguard your portfolio but want to stick to one asset, you can diversify using different locations, property types and price points.

As well as boosting your income, diversification also increases the resilience of your portfolio as a whole. By having different assets in different markets, the highs and lows will usually counteract one another to build a robust investment portfolio.

Be Conscious of Taxes

Naturally, making money is at the root of all investments, but it’s crucial to remember that when your profits are growing, the chances are, you’ll need to pay tax on this. While taxes shouldn’t determine – or deter – your investment plans, staying conscious of these additional payments is a valuable habit to have.

The key taxes to be aware of are Capital Gains Tax and Income Tax. The amount of tax you stand to pay on your profits will largely depend on the size of your gains and which Income Tax bracket you fall into. For example, your annual profits will be added to your salary which means you will pay Income Tax accordingly.

If you come to sell your investment asset, being in a higher Income Tax band could mean you face Capital Gains Taxes of 20% – or 28% if it’s a residential property. However, basic rate Income Tax payers are only expected to pay 10% Capital Gains Tax – or 18% if it’s a residential property.

Regardless of the asset, there will almost always be taxes to pay on your gains, which is more reason to continue with your financial plans. Investing is usually most lucrative on a long-term basis, so if you persevere with your assets, it’s likely that your gains will compensate for these taxes.

Invest for the Long-Term, Even During Volatility

It’s understandable that during volatile markets, your first instinct may be to cut your losses and sell up. But as we’ve already mentioned, investing is a waiting game and the longer you stay in it, the better your chances of financial success. While it can be difficult to see your hard-earned money fall during market lows, these are often followed by the biggest increases.

A prime example of this is the Financial Crisis. Between 2008 and 2009, stocks dropped by around 50%, causing many investors to turn to cash. However, research by Fidelity has shown that amongst 1.5 million workplace savers, those who persisted in the stock market were eventually much better off.

More specifically, those who stayed in the stock market from 2008 to 2017 saw their profits grow by 147% – twice the average 74% return for investors who escaped the stock market during Q4 of the crisis.

We saw it in 2009 and again during the pandemic – markets are agile and usually recover much stronger than they started. This makes perseverance one of the most important investment habits to have, with the potential to impact your returns and financial goals.

Many UK cities are forecasting long-term growth in both property values and rents, which is making them some of the best places to invest in UK property for 2022 and beyond. Want to know more? Read Best Places to Invest in UK Property in 2024 now.

Final Thoughts

Investing can be both exciting and challenging, and developing healthy investment habits from the outset can make the entire process much more simple. Having good investment habits can be the difference between reaching your financial goals and just missing the mark, which makes them that much more important. After the turbulence of the pandemic, reviewing your investment habits in 2024 is crucial. With new market trends and forecasts, it has only reinforced the value of financial planning, diversification and above all, investing for the long-term.