Wednesday, April 28, 2010

TIPS FOR SUCCESSFUL INVESTING

Article by Anthony Brodie Dip FP, AIMM, JP  Certified Financial Planner

1. Know what your goals/objectives are:
The first thing to ask yourself is, what are you trying to achieve?  This will have a vital bearing on the types of investments you should choose.  Are you investing to increase your income now, or is your aim to achieve capital accumulation for the future?  Or maybe something in between?

 2. Know your time frame:
Are you investing to buy a home in 2 or 3 years, or do you want to build up assets for your retirement over 10 to 20 years?  The assets that a prudent investor would select as short-term investments are quite different from those that would be selected for long-term investments.

The long term investor can take risk of having more funds invested in volatile investments like shares, because any downturn will in time have an upswing.  However, the short term investor who invested ins shares may be faced with a depressed market at precisely the time when the funds are needed.  Generally speaking, to get the best results you should aim to invest for the medium to long term if you you are investing in growth investments such as shares and property.

3. Know your risk tolerance:
It's no good choosing high risk/high return investments if you are going to lie awake at night worrying about them.  Be realistic and take a sensible approach based on your goals and time frame/s.  Do not expect a high return if you have all your funds invested in mostly fixed interest and cash.  This is one area where real assistance is required.

4. Diversify:
Don't put all your eggs into one basket, in other words diversify your investments by spreading them between an appropriate number of experience investment managers and the major asset classes (ie shares, property, cash, short term securities, fixed interest securities).  Usually all markets don't move in the same way at the same time, so if one asset class experiences a decline, chances are that the other classes will generally maintain their value.

5. Develop a strategy:
If an investment strategy has been based on quality advice, it will be appropriate for your circumstances for many years and won't need to be altered if market conditions change.  A common mistake is to forget about the strategy when market conditions change, that is some investors seeing the share market moving up are tempted to move all their money into shares.  If shares fall they then want to sell.  These investors try to time their investments to match turning points in the market and very often they only achieve the opposite.  Investors who sell when the market falls often only succeed in crystallising a loss.  Because they are out of the market chances are that they may miss the next rally. There is an old saying "It's not timing in the market that matters, but time in the market that counts".

6. Always seek good advice:
Always talk to an experienced and qualified Financial Planner about an investment strategy that will suit your circumstances.  The time he spends in reviewing your financial objectives, discussing your options and developing your investment strategy will probably be the best investment you ever make. 

Disclaimer: This article is no substitute for financial or investment advice and should not be read as such nor relied upon as such. You should seek your own professional advice tailored to your individual investment objectives, financial situation and particular needs.

If you would like further information or would like to arrange an appointment with Anthony Brodie by calling mobile 0425 234 234.

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