The 9 Golden Rules Of Investing
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 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.
- DIVERSIFY: One of the most important rules for successful investing. Diversify across asset classes, markets, geographical regions, managers or companies.
- AVOID CROWDS: 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 not different.
- Don’t be SWAYED by high returns: Don’t chase last year’s winners – look for this year’s opportunities.
- Invest regularly: 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 adviser who will help you achieve your objectives.