Making your own investment decisions can seem confusing and complicated, here are some keys to making investment risk-free.
Have a plan
Before you do anything else, you must define your investment goals. A well-defined plan will ensure you focus on your targeted annual and overall return, your investment time horizon and also what you consider to be an acceptable level of risk.
Understand risk and reward
Risk is best considered as "losing your money". It's amazing how many people say they have a high risk tolerance until they suffer a first loss and then completely change their minds.
Have a mix of different investments
Don't put all of your eggs in one basket. A portfolio that features some shares in both large and small companies, some bonds and maybe even specialist commodity or property funds should ensure that some income or capital gains are trickling into your savings pot whatever happens.
A bad stock in a good sector will outperform a good stock in a bad sector
Certain sectors do well at certain times of the economic cycle – say retailers during an upturn and drug stocks during a recession. Picking the right sector will reduce the legwork and help you focus on certain funds, trackers or shares at the right time.
Have a plan
Before you do anything else, you must define your investment goals. A well-defined plan will ensure you focus on your targeted annual and overall return, your investment time horizon and also what you consider to be an acceptable level of risk.
Understand risk and reward
Risk is best considered as "losing your money". It's amazing how many people say they have a high risk tolerance until they suffer a first loss and then completely change their minds.
Have a mix of different investments
Don't put all of your eggs in one basket. A portfolio that features some shares in both large and small companies, some bonds and maybe even specialist commodity or property funds should ensure that some income or capital gains are trickling into your savings pot whatever happens.
A bad stock in a good sector will outperform a good stock in a bad sector
Certain sectors do well at certain times of the economic cycle – say retailers during an upturn and drug stocks during a recession. Picking the right sector will reduce the legwork and help you focus on certain funds, trackers or shares at the right time.
Review your choice of investment platform
As part of the move to clean funds, investment platforms can no longer share in the fund manager's annual management charge. So they are having to make an explicit charge for buying, selling and holding funds. Most investment platforms are using this opportunity to review all charges so platforms that were cheap in 2013 may not be quite as attractive in the future.
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