We are constantly bombarded with investment advice.
You only have to read the financial pages to see a whole series of investment information. The consumer “money” sections are always full of suggestions as to how you should invest your money.
So, for balance, I thought I’d turn that on its head and put a list together for you of investment “don’ts”. Because, as with many activities, sometimes what you don’t do can be as equally important as what you do.
Here are 10 big don’ts when it comes to managing your investments.
1. Don’t worry about other people
Your investment strategy is all about you. After all, it’s your money and your future you’re investing for. So don’t worry about what other people are doing, how much profit they’ve made, or how much they’ve lost.
You know what your goals are. If you’ve got a plan in place, and remember to review that plan when necessary, then that’s all you need to worry about.
2. Don’t worry about the price you paid – value now is what’s important
This is a difficult one to avoid, because the design of most investment platforms means that every time you look at your portfolio it will tell you how much you paid for a certain stock.
The key thing to remember is that you’re investing to achieve your financial goals. Beating the market can give you a nice smug feeling, but ultimately what you’re trying to do is invest your money for growth.
3. Don’t overanalyse
Once you have an investment plan in place, stick to it. Spending hours poring over investment and company reports won’t necessarily make you any more successful.
Highly remunerated investment fund managers have teams of researchers and analysts to help them when they are making investment decisions, and not many of them beat the market on a regular occurrence.
For example, over the past 20 years 85% of all US equity funds failed to beat their applicable market index.
4. Don’t bother looking at short-term performance
If you can, you should ignore your portfolio for months at a time. Checking prices daily is for investment professionals.
At an industry conference a few years ago, I heard a fellow financial planner say that he thought growth on your investment portfolio could often be inversely proportional to the number of times you check its value.
Obviously, he was exaggerating for effect, but the point he was making was a sound one. Constant checking is likely to make you overreact to performance. You may be tempted to sell a fund or stock when you shouldn’t or buy more of another when the sound decision is to hold firm.
5. Don’t assume rich people are better investors than you
People get rich in different ways. Once they’re rich, they can afford to make mistakes that could cost them a lot of money. Most of us don’t have that financial cushion.
A few years ago, Neil Woodford could do no wrong as far as investors were concerned. The Invesco Perpetual income funds he was responsible for showed remarkable year-on-year growth and his word became gospel for the many who invested heavily in those funds.
But after setting up his own investment company, a few ill-advised investment decisions led to a many people who trusted his judgement losing at lot of their money. Meanwhile, he’s still rich.
6. Don’t have regrets
So, you didn’t buy that stock you read about in the Sunday Times, and it’s gone up 30% in the past six months. Maybe balance that with the other investment tips you read about at the same time that have gone down by the same amount.
7. Don’t overreact
If a particular fund or stock does well, then that’s great. You might want to quietly celebrate, but don’t get overconfident and assume that all your other trades will be equally successful.
Conversely, it’s daft to panic unduly if one particular investment decision goes badly.
The secret is to keep a level head and look at the long-term picture rather than react to every short-term movement.
8. Don’t try and time the market
Buying low and selling high is the aim of every investor – from the individual just investing their ISA fund to the fund manager looking after billions of pounds.
However, trying to time the market is notoriously hard, and making mistakes can be costly.
Recent analysis by leading investment company, Schroders, shows just how costly it can be. Getting your timing wrong and missing out on a handful of good days can result in a potential loss of £33,000 on a £1,000 investment..
Successful investing is a long-term game. You’re far better off sticking to your plan than trying to react to every market movement.
9. Don’t forget your financial goals
Have a plan and stick to it.
Remember that different investments may well have different rules and strategies. For example, the money you’re investing for your children’s school fees is likely to have a shorter timeframe that your retirement fund.
10. Don’t try to get by without a plan
It’s an old cliché, but if you fail to plan you really are planning to fail.
Set aside some time for quiet contemplation when you’re putting your plan together. Think clearly about your goals, and how you’re going to achieve them.
Within your plan, include some golden investment rules for yourself and then stick to them.
Get in touch
As you’ve probably realised from reading this article, having a clear and robust plan in place is crucial to the success of your investments.
To find out more, and to talk through your own investment aims, please give me a call on 07769 156 250.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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The Financial Conduct Authority does not regulate school fees planning, taxation & Trust advice and Will writing.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance