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Investment Strategies: Things That Successful Investors Don’t Do!

Investment Strategies: Things that successful investors don’t do!

When it comes to investment strategies here are some simple tips:

1. Successful investors don’t start without a plan, any more than they would start a road trip without at least a map and a destination in mind. The evidence is overwhelming that random investments made without a plan seldom, if ever, lead to success.

Your investment strategies don’t have to be fancy, but it should be based on where you are (your current financial situation), the risks you are prepared to take and your destination e.g. a comfortable retirement by a certain time in your life.

Your plan should call for specific action steps you will take. Successful investors expect to reach their goals over time, by identifying the right things to do, and then doing those things over and over and over. Saving money regularly is the most basic of these useful behaviours.

2. Successful investors don’t rely on just one investment, or even a handful. They diversify widely, knowing it’s impossible to reliably predict which investments will go up in value and which will decline.

Diversification doesn’t reduce risk, but it spreads your risk around. Over the long run, this will make your ride less bumpy and more comfortable. And that will make you more likely to stick with your plan. In addition, greater diversification often leads to higher returns.

Investment Strategies: How much does a financial advisor cost?

3. Successful investors don’t ignore how much they pay for investment services and products. They keep their costs low, knowing that is one of the few parts of the investment process they can actually control.

Over time, those “little” savings matter more than you might think. On a one-time investment of £10,000 that returns 8% over 20 years, cutting your annual expenses by 1% would boost your return to 9%. That would boost your ending value from £46,610 (8% for 20 years) to £56,044 (9% for 20 years). That puts an extra £9,434 in your portfolio – nearly as much as your entire original investment!

4. Successful investors don’t let the ups and downs of the market throw them off course. They realise that downturns and even bear markets are normal—and that weathering these storms is necessary for long-term success.

They do their best to stay the course, avoiding panic buying when prices are going up and steering clear of panic selling when the stock market is falling. This isn’t always easy emotionally, but it’s vital to your long-term success.

5. Successful investors don’t expect miracles and don’t base their investment strategies on unrealistic expectations or hopes for good luck. Your luck may be good, but it can just as easily be bad.

Investors may wish to build their plans on expected returns significantly lower than the historical averages. Here’s what that means in general terms: If the long-term trend of the stock market is 9%, make your plans on the assumption that your own stock investments will earn 6%. That will require you (or at least strongly encourage you) to save more. And that in turn will always serve you well.

If your returns exceed your expectations, you’ll have no trouble adjusting. But if things go the other way, you could wind up short of what you need to retire.

6. Successful investors don’t ignore taxes.

To whatever extent you can, use tax-advantaged vehicles such as ISAs and pensions depending on your situation.

7. Having avoided the other traps on this list, successful investors don’t get caught up in the incessant financial commentary in the media. Commentators always have at their disposal two “lists” of explanations for whatever is happening and whatever developments seem to be just over the horizon.

The “good news” list is always filled with plausible arguments for why the market will go up and therefore why investors should buy. The “bad news” list is always filled with equally plausible arguments for why the market is overdue for a downward trend and therefore why investors should sell, or at least avoid buying.

8. Successful investors don’t go it alone. Just like preparing for an endurance race you should consider a coach for your money. Helping with your plan, keeping you on track, guiding your decisions, being there when things get tough, making sure you gain from their experience – all these things, together with the fact that they are experts who have spent many hours passing exams and being approved by the regulator will make a huge difference to your investment strategies and overall outcome. You only get one go a retirement planning – paying a little on an expert to guide you on the journey could be the best investment you ever make.

David A. Norman
TCF Investment
From an original article by Paul A. Merriman

This Post Has One Comment
  1. Interesting thoughts here and if you are a new and/or inexperienced investor well worth a read.
    To me the most important aspect of investing is point 2.
    I have always felt as an investor, I need to be investing into the main areas such as shares, bonds and property.
    These investments come in many shapes and forms and this is where the financial adviser should really be able to give added value because he has access to so much “behind the screens” sort of information and detail.
    The problem though, is keeping ahead or even up to date with changes in the market as disasters such as Carillon can derail the best managed fund so sometimes you have to take a decision, do I move or remain.

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