BELOW ARE INVESTMENT TIPS TO GET YOU STARTED ON YOUR JOURNEY.
EDUCATION FIRST! KNOWLEDGE IS POWER!
An understanding of the basics is crucial to ensure you know how to do things like evaluating if a stock is overvalued or understand how to determine where to buy an investment property.
Getting an education allows you to take control of your financial destiny, even if you decide to get assistance from advisors. Talk to financial coach to help you get started in overcoming obstacles and educating you better in terms budgeting, saving, and tax-reduction strategies as well as investing strategies.
DON’T INVEST MONEY YOU NEED FOR LIVING EXPENSES
Ensure you don’t tie up money that you need to meet your ongoing living expense in investments.
By overcommitting money to investments, you create more stress on your daily life and this will lead to poor investing decisions and therefore results.
Invest what you can afford to and no more.
SET YOUR GOALS AND REALISTIC EXPECTATIONS
Decide how much money you want and when, and calculate what it would take to get there. If you cannot, speak with your financial advisor to help you with this.
Knowing these numbers will also help you to understand the type of assets you will need to invest in and the level of risk required to get the returns you need. Since returns are a function of risk, the higher the return required, the higher the risk you will need to take. Knowing this in advance can enable you to adjust your expectations so you don’t have to take on too much risk. Your financial advisor will have a roboust risk assessment with you and determine along the way if needed to change.
SUSTAINABLE INVESTMENT IS KEY: INVEST ON A LONG TERM
The beauty of compounding as we discussed earlier in the basics of financial literacy, is that holding your portfolio on a longer-term compounds to higher returns. However, if you do have both short term and long term needs; make sure you separate them according to your goals into two portfolios.
DIVERSIFY YOUR INVESTMENTS
Spread your money across different asset classes. This will spread the risk. It’s one of the safest ways to safeguard your investments.
Warren Buffet once said that diversification is for people who don’t know what they are doing. He is right to an extent because a lot of advice given on diversification is not great.
Diversification is not about just spreading your money across different stocks and hoping over time they go up as a group. It is good to have investments across different asset classes, time periods and geographies. By spreading your investments across different asset classes, you not only spread your risk, but you also benefit when each asset class is rising.
AVOID UNNECESSARY RISK
In the early stages of building wealth, there is always a tendency to want to take additional risk to move faster.
If you are going to be successful over the long term, you need to manage risk appropriately. Incurring losses chasing fast returns will derail you faster than anything else.
Know your limits and the limits of the investments you are making and build your expectations around these limits. Your financial advisor can help you with this.
MANAGE YOUR EMOTIONS
Your thoughts lead to your feelings, your feelings lead to your actions and your actions lead to your results. Having control of our emotions when making investment decisions will ensure better outcomes.
A good example of this problem is what people do when stock markets fall sharply, most people panic when their stocks are plummeting and they sell, normally right at the bottom.
If you take the emotion out and realise that you are in the stock market for the long term, that markets recover, you will save yourself that loss, and even be open to the opportunity of making some money when prices start to recover.
Some people are immune to emotional responses to their portfolio value over the journey—no doubt, no anxiety, no loss aversion, no panic.
Work with your financial advisors/ coach to help build emotional resilience. Our behaviour affects the way we invest and continue to invest
Managing anxiety and emotional comfort along the journey are at least as important in attaining a good outcome as determining the “optimal” long-term solution to your investment portfolio.
INVEST REGULARLY AND CONSISTENTLY
Investing is about building wealth and not about making money. If you currently invest, then reinvest the dividends you get from it. The beauty of compounding is great.
You are working today to earn money. Put money into your investments on a regular basis. It doesn’t have to be a large amount of money to make a difference.
Do something every day to become a better investor. Do some research, read books, magazines, forums, if you have some time to spare.
You can also get some coaching to help guide you.
The thing about investing money wisely is that it grows exponentially.
Money compounds over time, the sooner you start, the sooner you can get your money working for you. Compounding has been described as the 8th wonder of the world , so let’s get it working for you as soon as possible.
The returns may be small to start out in terms of dollars, pounds, euros etc but you have to get these small returns to be able to achieve the large numbers in the future.