So, you’re ready to get more from your money by investing. But how do you avoid costly mistakes and ensure your money grows? Here are five principles you should follow when it comes to investing.
This does not constitute advice and advice should be sought in all instances before acting on it.
1. Design a plan specifically for you and stick to it
The best way to achieve your goals is to have a sound financial plan. Everyone’s situation and requirements will be different, so your plan needs to be customised especially for you.
Think of your plan as a living document because you’ll need to regularly review your strategy with your financial adviser and make adjustments when necessary. We can help you build your investment plan.
2. Consider allocations carefully
While it is a good idea to have enough cash in savings that’s easily accessible for an emergency or as a rainy day fund, it’s not great for long-term investment as inflation will slowly break down the real value of your money over time. You’ll need to carefully consider how you allocate your funds and ensure you have other investments that will help you go the distance.
3. Always have a diverse portfolio
Reduce your worry over fluctuating market activity and the possibility of underperforming assets by having a diverse investment portfolio. Having a variety of investments provides peace of mind when one asset doesn’t perform well because other assets will pick up the slack. Don’t forget to diversify your asset classes as well as allocations within those classes as well.
4. Start as early as possible
When it comes to investing, the earlier you begin, the better. This is because you’ll have a better chance of long-term growth with compound interest, which is the ability to grow your money by reinvesting the earnings.
Throughout your life, your financial priorities will change, but if you start investing as soon as you can, when it comes time to reap the rewards, they will be plentiful.
5. Avoid activity bias and sit tight
If you’re new to investing, it might be hard to wrap your head around the fact that you don’t always need to be actively doing something.
The urge to act in a crisis, whether your actions will help or not, is called activity bias, and when the market is crashing, many people are tempted to jump into action.
Resist the urge as you can actually end up in a worse position than if you’d just let the market naturally return to the point it was before things started falling, as it inevitably will. Stay the course and trust your investments.
Work with the pros
Before you begin your investment journey, meet with your financial adviser to discuss your goals and your attitude toward risk to build a strategy that works for you. Get in touch with the experts at Dental and Medical Financial Services to get started today.
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