A short guide to investing in 2025
Not sure how to invest in 2025? You are not alone. Markets have been turbulent following the announcement of US tariffs in April, and geopolitical uncertainty still hangs over many parts of the globe. Where do you start as an investor in such a landscape, or how do you stay on track?
Whether you’re new to investing or refining your strategy, our team of financial advisers offer this short guide to provide a grounding perspective. Find out how to invest with confidence and clarity – not just this year, but over the long term.
Market trends: where are we now?
2025 has been a rollercoaster for equity markets. In the US, the S&P 500 (a leading index) performed well until late February, when investor uncertainty spread over US economic and trade policy. A crash then ensued in early April when President Trump announced a range of punitive tariffs (on “Liberation Day”).
Typically, bonds are seen as a “safe haven” by investors when stocks fall. However, on this occasion, US Treasury yields rose as the tariffs sparked a fall in confidence over the US dollar (USD) and institutions. Eventually, Trump was forced to water down his measures, leading to a 90-day pause in his initial tariffs (excepting China). Markets calmed in response.
This volatility in the US also had knock-on effects on markets in the UK, the eurozone and further afield (e.g. Japan and wider Asia). Looking ahead, there is still uncertainty over how US trade policy might evolve, and forecasts of a US recession loom high in investors’ minds. However, there have been encouraging signs more recently between the US and China, who have “made progress” at trade talks in Switzerland.
How should I invest?
Given this turbulence and uncertainty, how should you invest? One option is to simply keep out of the markets. However, this is likely to undermine your wealth goals over the long term.
Whilst cash can feel “safe” (since its price does not swing on a stock exchange), inflation typically erodes its value. If your savings interest rate does not keep up with the rising cost of living, your cash will lose its spending power over time.
As such, cash is useful for short-term goals, such as building an emergency fund, perhaps 3-6 months’ worth of living costs. To build wealth in real terms, however, an investor needs to think about other asset classes with more growth potential – e.g. shares and bonds.
How should investors approach assets such as these? Some investors think they can “time the markets.” For instance, in late February 2025, they could have sold their S&P 500 investments before the “dip” and re-entered the market on 8 April to “buy the dip” (when the index started to rise). However, it is extremely difficult to predict market movements in this fashion consistently.
A better approach is to “drip feed” into an investment portfolio (e.g. monthly contributions from a pay cheque). This is known as pound-cost averaging, and it involves investing a regular, fixed amount, irrespective of market fluctuations. This lowers the temptation to time the market, and it can “smooth out” market volatility – making investing more palatable, even enjoyable.
What should I do in 2025?
Each investor has different goals, risk appetites, values, interests and investment “horizons” (the length of time until they need the money). As such, our financial advisers must take a tailored approach to each client when discussing their portfolios.
That said, there are some general, time-honoured principles that can help investors in 2025. In particular, diversification is crucial to all investors. This involves “spreading out” your holdings across different asset classes, geographic regions, sectors and companies.
Whilst diversification cannot avoid systemic risks, it can reduce your overall risk exposure if one particular holding underperforms or fails. It is also important to recognise that diversification takes a different form for each client, depending on their needs (which may shift over time).
As such, it helps to discuss your options with a financial adviser and have regular reviews after you have agreed on a strategy together. If your needs or asset allocation changes, the adviser can recommend suitable adjustments (where necessary).
A second time-honoured principle of investing is to keep a long-term view. In a storm, it is easy to focus on the waves rather than the destination in the far distance. However, jumping ship (e.g. panic selling shares) rarely helps. Instead, recognise that storms are a part of the investor journey, and they will eventually pass. What matters is getting to your goal.
Invitation
We hope these insights have helped you. If you want to ensure you’re taking the right steps to safeguard and build your investments, please get in touch.
Please note:
Your capital is at risk. Investments can go down as well as up. Past performance is not indicative of future results. Tax treatment depends on individual circumstances and may change. This content is for information only and not investment advice. Any decision to invest is the reader’s own. Diversification is key to managing risk. Market volatility affects investment values. Inflation erodes savings. Liquidity risks may prevent quick access to funds.
