For most of us, the prospect of getting into the Dos and Don’ts Investment market is more than a little daunting.
Wagering your hard-earned money against various forms of earning prospects is a risky business and one you should approach very carefully, but a series of sound investments can multiply your money and set you up for the future.
Once you’ve understood the basics of what investing is, it’s important you acknowledge the major ‘dos’ and ‘don’ts’ of successful investment.
- Understanding what works in the market: Learn from the best and pick up some literature from those who’ve been there and done it to understand the market you’re getting into. There are many texts that will explain the science of finance in simple terms. From these, you can create a basic set of rules to abide by that will work for you.
- Determining a strategy: Your personality type and traits will determine what sort of investing strategy works best for you. The best way to approach the market is with a mix of confidence and care, but that might not be your style. Check out a guide on the matter to see where you sit.
- Choosing the right investment path: Once you understand the market and know the right model for your personality, it’s important you start on the right path. Most good investors start with a low-risk, diversified portfolio and gradually build confidence in the market as their understanding grows.
- Planning the journey and being ready for the long haul: If you’re taking investing seriously, have a plan of how long you want to be in for and what you want to achieve. Also, know that investing is a long-term commitment; ‘quick wins’ are for the movies.
- Failing to properly assess risk: Investing can offer big returns and the potential to make life-changing amounts of money, hence why many are attracted to it. However, with such upside potential must come the downside possibilities, and it’s essential that you account for such risk when approaching the market. You must prepare your portfolio to endure both the good times and hardships as best you can.
- Not diversifying your portfolio: Focusing on one area of the market tends not to be a good idea. Whilst a certain sector may win big, it may also lose big. Diversifying your portfolio with different industries and correlations means you’re protected against a particular market hit.
- Trying for big wins by timing the market: Especially for rookies in the market, attacking day trading as a ‘get rich quick’ method is a bad idea. Day trading is a high-risk environment where you stand a good chance of getting badly burnt.
- Understanding what you are buying: Investing in markets you understand will play a major part in your success. For example, if you are passionate or knowledgeable about cryptocurrency, then you will understand good or bad noises coming from the market in the news. This, in turn, will help you plan wise, low-risk investments.
Ask the Professionals
As we’ve established, investing is a complex and dangerous game that needs to be managed correctly. To help you with this, you may wish to seek professional advice, but tread carefully with who you approach.
Remember when you are in the market you are competing with large financial institutions and various investment professionals. Beware of seeking professional help from those involved in the market who may advise poorly due to a conflict of interests, instead look for advice from an independent firm.
Hymans Robertson are an example of an independent firm that offer investment advice but don’t manage money. This removes any conflict of interest when it comes to consultation, meaning you can trust their opinion.
You might want to talk to the professionals, or you might want to try and learn the game yourself. Either way, it’s imperative that you approach the market with care, start off slow and build a sound investment portfolio to boost your financial future.