As I have mentioned before, I do not believe in get rich quick schemes and I do not have magical investment formulas. My investment principles are based on over forty years of experience and successful implementation, which I use for myself and for my clients.
Start with the end in mind
I have said it many times and I will say it again, you must know where you want to be and when. Everyone wants a great rate of return, but how should your investment strategy be designed? It should ensure that it assists you to: either provide an income and/or grow your capital to ensure that you increase your chances of achieving your financial goals. Start with the end in mind and know what you are trying to achieve and establish your timeframe. For example, don’t invest in shares for a quick gain if you will need the money in 12 months. The intended quick gain could actually be a quick loss. If you can stay invested for 5-6 years then the risk of short-term volatility diminishes with the longer time frames.
Invest not Speculate
The tried tested and true ways that have worked many times before are hard to dismiss. Investment is for the long-term. That said, at times you have to think outside of the box. But then, you must do plenty of homework before you jump into anything in order to minimise your risk. Almost everyone was happy to be an aggressive investor prior to the GFC, but realised their attitude to risk was different when markets fell. Ensure your investment choices reflect your tolerance to volatility and risk. Invest in things you know will be there tomorrow. Sensible and controlled investing is not gambling, but speculative investment is. Stick with quality and be patient – you will be rewarded in time.
Resist the temptation to follow the herd
Many people base their investment decisions on their emotions at the time. Being fearful (in falling markets) or greedy (in rising markets). Following the herd or making snap decisions based on emotion is a recipe for disaster. Warren Buffet (renowned US investor) commented during the GFC that he believes investors should “be fearful when others are greedy, and greedy when others are fearful”. Set your own goals, run your own race and try to screen out the background noise. Make rational and factual based decisions where possible – a great adviser will assist with smart decision making in times of market volatility and uncertainty.
Never over commit with debt
Although borrowing to invest is a good way to increase your wealth over time, ensure it does not place unnecessary pressure on the family finances and require that you compromise your lifestyle to a point where you cannot afford to enjoy yourself. Placing unnecessary financial stress on yourself is not recommended!
Never over commit with investments
Ensure you have an emergency cash supply. Ensure a portion of your investments are liquid and can be sold quickly if the need arises (term deposits are handy for this). But importantly make sure you never have to sell if markets are low and the timing not right.
Do not hesitate
Begin your investment strategy as early as you can, as it allows you to build the foundations of future financial success. Even when markets are high, if you are ready; just do it. Do not wait for the market to rise or to fall. Take the step when you need to, because this is a long-term strategy. If you are disciplined and patient, you will reap the rewards.
Do not be a loner
People that are financially sound and successful get advice. This is because if you have the right adviser who is not just selling you a product but has your best interest at heart he/she will give you right advice about your financial strategy and structures and your chances of achieving financial security increases dramatically.
How I can assist?
I am happy to offer you a complimentary consultation to discuss your options for wealth creation. All you need to do is email me at firstname.lastname@example.org with the heading ‘Complimentary Consultation’ and I will send you a questionnaire, which will help you and help me formulate the right strategy for you.
Here is a short article titled: ‘A beginners guide to negative gearing’
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Till next time.