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The investment world can change dramatically from one month to the next, as we’ve all seen recently with the Covid – 19 outbreak. But these secrets of successful investors never go out of style.

 
Successful investing can be one of your biggest allies in the quest for long-term financial security. Unfortunately, unsuccessful investing can leave you wishing you’d kept your money in the bank. So what are the secrets to making your investments achieve what you want them to achieve?  Here are some of the tactics used by successful investors around the world.

 

1. Start with a plan

Smart investors don’t just look for ‘good’ investments. They look for investments that will help them achieve specific goals. You may be seeking a return above that available on cash or term deposits. In this case there are other investments such as shares and fixed income, which may be expected to generate higher returns than cash over the long term, however, they are also more volatile, so investors need to consider both the risk and return components of their portfolio.

 

2. Diversify widely

One of the main goals of investing may be to ensure you have a mix of assets that are likely to perform well at different times – helping you survive any downturn in a specific market or industry sector. While many Australian investors are heavily exposed to Australian shares, a well-diversified portfolio will generally hold assets in each of the major asset classes (e.g. Australian and international shares, property, fixed income and cash).

 

3. Watch your costs

It’s easy to get fixated on the returns your investments can generate. But successful investors always keep track of and seek to minimise, the fees and taxes associated with owning them. A ‘buy and hold’ strategy can help you avoid transaction costs like brokerage, or buy and sell spreads from managed funds. It can also help you reduce capital gains tax, which generally decreases by 50% when you’ve held an asset for over 12 months.

 

4. Market Timing Risks

Despite periods of significant volatility on a daily basis, like we’re seeing at the moment; over the long term, investments in assets such as Australian Shares have generated strong returns.

 

5. Don’t panic

When share markets retreat (as they have recently), smart investors don’t hit the panic button and sell long-term investments based on short term volatility – this is made easier by following Step 1 “Start with a Plan”. Instead, if you continue to invest during a market downturn, you may be able to buy high-quality investments at a lower price than you could if you waited for markets to recover. Following the GFC, when the stock market bottomed in early 2009, many investors sold out of equities and held large proportions of cash in their portfolios. The opportunity cost of this decision has meant that some investors have missed a significant rally over the past decade.

 

6. Protect your assets

Even a carefully constructed investment strategy can come unstuck if you need access to your money in an emergency. A smart strategy is to ensure you maintain a sizeable cash reserve, and put in place appropriate insurance such as income, TPD, and life insurance. Having appropriate insurances in place can help prevent the need for a ‘fire sale’ of your investments if you suffer a serious illness or accident. Tip: Income protection typically replaces up to 75% of your income if you can’t work due to an illness or accident. 
 
 

7. Book a free consultation with one of our Financial Advisers

Getting expert help in relation to your financial future is important. We seek expert help in other areas of our lives, our financial future should be no different. Often people make poor choices in relation to their own money, as it’s often a decision made from an emotional position; it’s always better to seek help from people who aren’t emotionally invested but are well thought out and provide advice from that standpoint. We also know that trust is key when working with a Financial Adviser. Have a look at what our clients think about us. 

 

Book in for your FREE consultation with one of our local experts, today!

 

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RI Advice Group Pty Limited www.riadvice.com.au ABN 23 001 774 125, AFSL 238429. The information/advice (including taxation) on this website is General Advice Only. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. You should obtain a Product Disclosure Statement relating to the products mentioned, and consider the statements before making any decision about whether to acquire products or services. We take your privacy seriously and as such we, or RI Advice Group will never ask you to transfer money via email request unless we have spoken to you in person or the transfer is part of an existing arrangement between you and your financial adviser. If you receive any such requests that are outside the agreed arrangements you have with your financial adviser, please contact our office immediately to confirm the validity the request before you take any action – 1800 738 473 The views expressed in this publication are solely those of the author; they are not reflective or indicative of the Licensee’s position and are not to be attributed to the Licensee. They cannot be reproduced in any form without the express written consent of the author.
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