It’s important that we plan for the future and make the right investment decisions to create a better tomorrow for ourselves and our loved ones. Regardless of where you are in life, you want to make sure that your money works hard for you, earning you the best possible returns without taking undue risk. So, when it comes to investing, what do you need to consider? Here are the six principles of investing we firmly believe will lead to a better investment experience.
Create a Plan and Follow It
Regardless of what your goals are in life, with the right planning and investing, you can achieve them. The main thing to consider are your main investment objectives and how they align with your goals. Having a goal is one thing but the right plan can help bridge the gap between hoping you achieve your goals and actually achieving them. Regular investment reviews are necessary to ensure they are still taking you in the right direction.
It’s Not Always About Cash
It’s an old-fashioned notion that we should always put our cash into savings. While this is true to some extent, inflation is going to chip away at your savings. For most people with longer-term investment plans, cash needs to be supplemented with investment
in other asset classes that can help to offset inflation and deliver potential capital growth. If you choose to invest for long-term goals, it can help to recognise that you shouldn’t ignore increasing prices and how they can also eat into the value of your assets. With different asset classes comes various levels of protection against inflation, so that is worth considering.
Diversification is Crucial but Always Look at the Bigger Picture
Opting for a variety of investments will ensure you manage your investment risk and increase your chances of finding success. It’s possible to diversify your portfolio across a range of asset classes, industries and geographical markets. With diversification comes the potential to ride the ups and downs in your investments, helping to reduce your risk.
Stick to Your Plans
The main thing is to ensure that you stick to your plans. Too often, investors will react just for the sake of reacting during a crisis, something that is known as activity bias and the action they take might not offer any benefit. When things are not looking good, it can be tempting to change your plans but this can cause problems and you won’t be able to take advantage of asset prices when they recover. It is natural for markets to follow cycles and while you might enjoy the fruits of the good years, you have to be prepared to ride out the bad years. It is common to experience short term dips in the market but over the long term, they tend to be smoothed out, increasing the potential for healthy returns.
Invest as Early as Possible
If you want to build wealth then it pays to begin investing as early as possible. It is considered to be more effective if you choose to invest over a longer period of time instead of waiting until you have a large amount of cash to invest. This is because of compounding which is the way in which the money you earn through investments continues to help you earn more money. So, you will grow the money that you invested initially but you also grow any interest that you accrue as well as dividends and capital gains.
Take Financial Advice
All investors have different goals and the tips above are designed to provide general financial advice, but nothing can take the place of financial advice that is tailored to your specific circumstances. Once the risk tolerance of an investor has been identified and their investment goals determined, it is possible to put a plan in place that includes a portfolio of a variety of asset classes such as equities, cash and alternative investments. The aim is to take a long-term view with investing and ensure that any returns after tax are maximised.
With the right strategy in place, it is possible to make informed choices and invest for your future. However, nothing can substitute professional investment advice as this will ensure you make better decisions and make your personal finances work better for you and your future.
LOOKING TO INVEST FOR GROWTH, INCOME OR BOTH?
If you’re not sure which investments are right for your needs, we can help. Whether you are looking to invest for growth, income or both, we can provide the expert advice to ensure you achieve your financial goals. To identify which investment options are right for your individual circumstances or to find out more, please contact us – we look forward to hearing from you.