Here’s how I’d build a SIPP In 2024 with £350 a month

Putting away some money on a regular basis to build a Self-Invested Personal Pension (SIPP) could help get my finances better prepared for retirement.

While that has an obvious attraction, knowing where to start can be confusing.

But putting off building a retirement fund would give me less time before I want to withdraw money. From a long-term investing perspective, that could mean my portfolio does not have enough time to show its real value by performing well.

Starting with what I have

No matter what my pension ambitions may be, my approach to building up a SIPP would involve two key considerations. How much would be enough to help me try and achieve my investing ambitions, and how much could I afford?

After all, I want to build a sizeable SIPP but also need to stay within my means.

In this example, I imagine investing £350 a month into a SIPP. That would add up to £4,200 per year. The sooner I start, the more years of contributions would be working for me by the time it comes to retire.

Setting an investment strategy

With time on my side, I could take a long-term view. Part of that would involve considering what investment strategy might suit my personal circumstances best. That involves how much I invest. But it also includes my risk tolerance.

People have their own risk tolerance – and investing beyond my personal tolerance could cause me problems. Based on how much I was able to invest and my risk tolerance, I could make choices about what sort of shares to buy.

Growth and income

For example, I might choose shares I thought had strong growth prospects, like Alphabet, or ones that appeal to me primarily because of their dividend. The 9.7%-yielding British American Tobacco is an example of such a share I own in my SIPP.

I tend to buy shares in individual companies. But when investing my SIPP, I sometimes also consider buying shares in investment trusts like City of London. Different trusts might offer me a mixture of growth and income prospects, as well as helping to keep my pension diversified.

Focusing on long-term wealth building

Diversification is an important risk management strategy. Over the long term, I am almost bound to be disappointed by at some of the shares I choose for my SIPP. Hopefully though, any such disappointments could be more than balanced by making other choices that turn out to be highly rewarding.

But while I keep my SIPP diversified, that does not mean I would invest it in dozens and dozens of different shares.

Instead, I would aim to focus on buying only into what I see as great companies at attractive prices.

Taking time to find such shares – including ruling out a lot of options because they do not match my investment criteria – could turn out to be very financially rewarding for me.

The post Here’s how I’d build a SIPP In 2024 with £350 a month appeared first on The Motley Fool UK.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. C Ruane has positions in British American Tobacco P.l.c. The Motley Fool UK has recommended Alphabet and British American Tobacco P.l.c. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.