Saving may preserve your capital but it’s unlikely to grow it enough to beat inflation over the long term. That means, if you really want to grow your money, you probably need to get into investment. With that in mind, here are five key investing guidelines to live by.
Always have a clear investment strategy
Having a clear investment strategy is crucial for achieving long-term financial goals. Without a well-defined investment plan, investors are more likely to make emotional decisions based on short-term market fluctuations, which can lead to poor investment choices and significant losses.
A clear investment strategy helps to ensure that an investor’s portfolio is diversified and aligned with their risk tolerance, time horizon, and financial objectives. It also provides a roadmap for making informed investment decisions and helps to minimise the impact of market volatility on investment performance. Ultimately, a clear investment strategy can help investors stay focused on their goals and make the most of their investment opportunities.
Always do your research before making a decision
Researching before making an investment decision is critical to making informed choices and minimising the risk of potential losses. Without adequate research, investors are more likely to make emotional decisions based on incomplete or inaccurate information, leading to poor investment choices.
Conducting thorough research helps investors understand the fundamentals of an investment, such as the company’s financial health, industry trends, and market conditions. It also helps investors evaluate the potential risks and rewards associated with the investment.
By doing their research, investors can make more informed investment decisions, reduce the impact of market volatility, and maximise their returns. Ultimately, investing without proper research can lead to significant financial consequences, making research a crucial aspect of any investment decision.
Make sure you always understand your investments
Investors need to understand the investments they make to make informed investment decisions and minimise the risks associated with investing. By understanding an investment’s characteristics, investors can evaluate the potential risks and rewards associated with it. They can also determine whether the investment aligns with their financial goals and risk tolerance.
Without adequate understanding, investors may not realise the potential risks associated with an investment until it’s too late. Understanding an investment’s features can also help investors make informed decisions about when to buy or sell the asset. Ultimately, investing in an asset without understanding it can lead to significant financial losses.
Always remember the impact of fees and taxes
Investors need to remember the impact of fees and taxes when making investment decisions. Both fees and taxes can significantly impact investment returns, reducing the potential gains investors can make.
Fees, such as brokerage fees, management fees, and performance fees, can eat away at investment returns over time. Taxes, such as capital gains taxes, can also reduce returns, particularly when gains are realised over a short period.
This means that investors need to evaluate the fees associated with any investment and consider the impact of taxes when making investment decisions. By minimising fees and tax obligations, investors can maximise their investment returns and achieve their financial goals more effectively.
Forget about trying to time the market
Timing the market refers to the strategy of buying and selling assets based on short-term market fluctuations. Attempting to time the market can be detrimental to an investor’s portfolio and long-term financial goals.
No one can predict market movements consistently, and attempting to do so often results in missed opportunities and significant losses. Furthermore, frequent buying and selling of assets can result in higher transaction costs and taxes, further eroding investment returns.
Instead, investors should focus on developing a sound investment strategy, based on their risk tolerance, financial objectives, and time horizon. By diversifying their portfolios and staying invested for the long term, investors can achieve their financial goals while minimising the impact of market volatility.
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The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.
Approved by The Openwork Partnership 27/3/23
