DIY investors pass on their top tips to those starting out

Getting good at something is rarely a quick process – and one that can often involve many headaches, frustrations and mistakes. 

But those with more experience can usually offer some tips about how to get better, and the world of investing is no exception to this rule.  

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That much was apparent earlier this summer, when we asked members of  our social trading network ii Community to share the suggestions they would give novice investors. 

Our post elicited around 130 responses, with several common themes emerging.  

Whether you just want to build a sensible, hands-off portfolio or you aspire to become a great stock picker, the lessons learned by more experienced investors are worth heeding. 

Below, we break down some of the main points that arose from the discussion on ii Community.  

The basics: sensible stuff  

Some newer investors might simply want a solid portfolio that does well for them over the longer term, without too much stress. 

We’ll first look at the guidance most relevant for these types.  

Many of the tips here were about habits and behaviour.   

Members of the ii Community network pointed to the sense of investing regularly – and harnessing the magic of pound cost averaging, where you buy both when markets are high and low. That offsets the risk of buying in when the market is especially frothy.  

They similarly pointed to the importance of compounding, where your investment gains then make their own gains and massively enhance returns in the long run.   

Several members highlighted the use of reinvesting dividends – and as we have previously argued, investors must remember to use accumulation or growth share classes on funds in order to automate such reinvestment.  

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On a more human note, novices are warned not to invest based on their emotions, but attempt to follow a process. 

As one member, Yemster, put it: “Don’t invest on emotions, don’t cash out or stay in just on emotions.”   

And as Smiffy added: “Don’t get stressed when you see your gains and losses - reassure yourself in knowing that these values are only real at the point in time when you buy or sell.”  

Members also pointed to the risks that can accompany investing based on a fear of missing out (FOMO) – a phenomenon that has been especially strong on the back of the artificial intelligence (AI) trade.  

One member went even further, warning to avoid “hyped IPOs, commodities and leveraged exchange-traded funds (ETFs) and day trading, currency trading and spread betting”.  

Funds as a starting point  

It is always good to start with the basics, and multiple individuals made the case that beginners should first invest in funds and only go for more sophisticated (and riskier) holdings as their knowledge advances.  

As L0ng_L1ne put it: “The less experience you have, the more boring your portfolio should look. The most boring thing you can have is a cheap all world index tracker that you pay into monthly.”  

This makes sense in many respects – although a beginner investor should be warned of the reliance of such a fund on a handful of companies.   

The HSBC FTSE All-World Index C Acc (BMJJJF9) fund frequently graces our weekly ISA bestseller list  and has 60% of its portfolio in the US market alone, with the so-called Magnificent Seven shares making up almost 20%.   

But other options do exist, from using the less US-heavy Vanguard LifeStrategy range to putting together a selection of regional equity exchange-traded funds (ETFs).

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Otherwise, the principle of using riskier investments as and when your interest and experience grows does make sense. 

Very generally speaking, an extremely diversified fund (like a properly diversified passive) should be a sensible option for the long term.  

Active funds can introduce greater uncertainty, with the standout names generating a good level of outperformance versus the market. 

And very generally speaking, open-ended funds are simpler than investment trusts, which come with other complications such as gearing and, often, more volatility.   

The sheer level of disclosure from investment trusts, and the esoteric investments available such as infrastructure assets, might appeal to more confident investors.  

Finally, shares might appeal to the investor with the stomach for market volatility and the ability to do the research.  

Shares can vary notably by profile: a dividend-paying FTSE 100 stock might feel more steady and predictable than a small-cap mining share, although there can sometimes be upsets on this front.  

How do you learn more?  

Investors can certainly make such a transition, with one of our DIY Investor Diary pieces earlier this year highlighting one individual who went from using passive funds to having most of his money in just one space stock.  

Not everyone will want to make such an extreme shift. 

But if you do want to enter the world of stock picking, a few strategies might help.  

As several members put it: “Educate, educate, educate”. This can take various forms.  

There’s paying attention to financial news and using some of the dedicated investment publications and podcasts out there, including our very own On The Money show.

 Similarly many investment books are available, and a list of 15 recommendations from one ii Community member is replicated at the bottom of this article.  

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Beyond that, there’s the idea of investing in what you know. 

That could mean investing in an industry you have worked in or whose services you use – although this maxim can sometimes limit you to specific sectors unless you are happy to research newer ones.  

Investors who want to properly research companies will need to familiarise themselves with certain terms and concepts: think valuation metrics, debt, different measures of profit and so on.   

It’s also worth understanding what might move a share price or affect a fund’s performance, although the factors at play here are numerous. 

One ii Community member pointed to the impact of financial reports, director dealing, legislation and regulation, currency moves, inflation, interest rates and sector competition.  

As we’ve noted before, some broad rules do apply to funds and asset classes, for example with bonds (and quality growth funds) tending to dislike interest rate rises.  

Where not to look  

The investment world is now awash with useful information – but multiple members did warn to take caution in one particular area. 

Many said that investors should be wary of investment tips on social media, some of which could be poorly researched and others which could be outright “pump and dump” scams.  

There is finally a call to learn about yourself as an investor. 

That means understanding your objectives, how you prefer to invest and what appetite for volatility (and losses) you have. That knowledge is likely to guide an individual more than any one tip.  

  One member’s book suggestions  

1. Essays in Persuasion — Keynes: useful for building broader economic judgement and understanding how major thinkers frame markets and policy.  

2. Security Analysis — Benjamin Graham and David Dodd: a foundational text for learning disciplined, valuation-based investing rather than speculation.  

3. Where are the Customers’ Yachts? — Fred Schwed: a witty introduction to Wall Street’s absurdities that helps beginners avoid hype and overconfidence.  

4. The Intelligent Investor — Benjamin Graham: the classic beginner’s guide to long-term, risk-aware investing with a strong margin-of-safety mindset.  

5. The Great Crash 1929 — John Kenneth Galbraith: a clear lesson in market psychology and bubbles, helping novices appreciate how speculation can unravel.  

6. Common Stocks and Uncommon Profits — Philip A. Fisher: teaches a growth-investing approach focused on quality businesses and long-term compounding.  

7. Paths to Wealth through Common Stocks — Philip A. Fisher: a practical companion to Fisher’s ideas, useful for learning how patient stock selection builds wealth.  

8. Business Adventures — John Brooks: uses real corporate stories to show how management mistakes and market events affect investments.  

9. Common Sense Mutual Funds — John C. Bogle: ideal for beginners because it explains why low-cost, diversified fund investing often beats active trading.  

10. Common Sense Investing — John C. Bogle: a straightforward case for simple index investing, which is often the best starting point for novices.  

11. The Ten Commandments for Business Failure — Donald R. Keough: a memorable way to learn what *not* to do, especially useful for understanding behavioural mistakes.  

12. Investing Between the Lines — L.J. Rittenhouse: helps beginners read between financial statements and headlines to spot what really matters.  

13. The Clash of the Cultures — John C. Bogle: explains the conflict between investing and speculation, reinforcing sensible long-term habits.  

14. Outsiders — William N. Thorndike Jr: shows how exceptional capital allocators create value, giving novices a model for intelligent leadership and capital use.  

15. Strategic Value Investing — Dermot Murphy, John R. Nofsinger and Kenneth L. Fisher: Offers a more modern framework for value investing, bridging classic principles with practical strategy.