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  • Writer's pictureDarren Pestell

Six principles of investing...

Updated: Jul 10, 2023

1. Develop a strategy and stick to it

Having a sound investment strategy be the difference between simply hoping for the best and achieving your investment goals. For example, the strategy of investing frequently can be highly effective. This encourages a disciplined approach whereby investing becomes a continued priority rather than a one-off event. This can also help to smooth out some of the volatility of the market cycles and enable you to benefit from the smoothing effects of “pound cost averaging.” You should review your plan regularly with your professional financial adviser and adjust things when necessary but maintaining the principles of your strategy and avoiding the distraction of short term volatility is key.

2. Think twice before holding all of your money in cash

Holding all your money in cash can seem appealing as a safe and secure option, but as we know inflation is likely to eat away at your savings as many have started to experience recently. For longer-term investment plans, cash needs to be supplemented with investment in other asset classes that can help beat the eroding effect of inflation and offer better growth potential.

3. Diversify and always consider your investments as a whole

When markets are fluctuating, it is important to focus on the bigger picture. In a market where one asset class is performing poorly another asset class may be performing well. Having a diverse portfolio of different asset classes that do not perform in the same way at the same time can help to alleviate some of the natural economic and market cycles. When you diversify, you are better placed to benefit from opportunities across a range of

different investments as they emerge. Your professional financial adviser will help you ensure you have a diverse portfolio, consisting of a range of asset classes appropriate to your circumstances and risk profile.

4. Start investing early if you can

Investing over a longer period of time is widely considered more effective than waiting until you have a large amount of savings to invest. The earlier in life you start investing, the better your chances of long-term growth due to the power of compounding. Compound growth (the ability to grow an investment by reinvesting previous growth) is a powerful force but is most effective in a long-term investment. Whether it is the right time for you to start investing will depend on your circumstances and your financial adviser can help you develop a clear financial plan.

5. Resisting the urge to ‘just do something’

Sometimes we all find it difficult to resist the urge to ‘just do something’ in a crisis, regardless of whether the action will be helpful or not. When investments are falling in value, it can be tempting to abandon your strategy and sell them, denying yourself the opportunity to benefit from any recovery in prices. Markets go through cycles, and it is important to accept that there will be good and bad years. Short-term dips in the market tend to be smoothed out over the long term, increasing the potential for healthy returns.

6. Ensure you have a tailored solution

Every investor is different, with varying circumstances and goals and therefore whilst the points above are good general tips, there is no substitute for a strategy that’s tailored specifically for you. What is more, in turbulent times, professional financial advice can help you take the emotion out of investment decision making and provide an objective view.

If you’d like more information or a review of your existing investments get in touch for a FREE initial consultation so we can build a plan together for your financial future.

Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets beyond our control. Investments and the income from them may go down as well as up and you may get back less than the amount invested. Past performance cannot be used as a reliable prediction of future performance.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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