While markets are performing well it’s easy to sit back and watch investments rise in value. However it’s a different story when markets are not performing so well and uncertainty abounds. Holding your nerve is not easy. So how do experienced investors handle this?
Here are nine investment tips:
RECOGNISE THE CYCLE:
Financial markets are all prone to move in cycles. Sometimes the troughs feel like they will last forever but they do eventually end and move on to higher levels.
One of the most important rules for successful investing. Diversify across asset classes, markets, geographical regions, managers or companies.
The worst time to invest is when everyone else is rushing in. Become a contrarian investor whilst still applying fundamental quality tests.
BUY AND HOLD:
Buy quality investments and hold them – at least until they have had time to achieve their expected return. Very few investors make money through speculating.
THIS TIME IS NOT DIFFERENT:
When the market goes dramatically up or down there is a tendency to cry “this time it’s different”. This time is definitely notdifferent.
DON’T BE SWAYED BY HIGH RETURNS:
Don’t chase last year’s winners – look for this year’s opportunities.
Implement a disciplined savings plan often referred to as “Dollar Cost Averaging” – a little bit often can build up to a lot.
CONSIDER TAX IMPLICATIONS:
If you are a wealth builder, seek capital gains in preference to income. If you need income, investigate different structures that help to minimise tax.
HAVE A REGULAR CHECKUP:
Review your investments and strategy on a regular basis. Work with a professional financial advisor who will help you achieve your objectives.
If I was 25 again, I would… be wary of investment fads.
Today it’s crypto-currencies like Bitcoin. In 2000 it was technology shares. In 1987 it was shares in general, and way back in the seventeenth century investors were going nuts over tulip bulbs.
When it comes to investment, fads occur when asset prices are driven up by irrational excitement, greed, and ‘FOMO’ – the fear of missing out. The fundamental rules of valuing an investment fly out the window and speculation dominates trading as hoards get caught up in the frenzy before experiencing a crash.
While it may be difficult to resist the temptation to join in I would, instead, put my money only into investments that I understand; those with values based on a more realistic capability of generating long-term income and/or capital growth. I wouldn’t rule out the occasional small flutter on a ‘speckie’, but it would come out of my entertainment budget rather than being part of my core portfolio.
Speak to a Think Big Financial Advisor today about investing in your future.
GENERAL ADVICE WARNING: All strategies and information provided on this website are general advice only which does not take into consideration any of your personal circumstances. Please arrange an appointment to seek personal financial and taxation advice prior to acting on this information.