Making better investment decisions

Achieving financial goals and gaining the freedom to live the life we want

Investing is no longer a luxury reserved for the very wealthy; it’s a financial necessity for everyone. Whether we’re saving for retirement or our children’s education, personal investing is crucial in securing our financial futures. However, navigating the world of equities, bonds, and property can be daunting, especially for beginners.

Personal investing is about more than just making money. It’s about achieving our financial goals and gaining the freedom to live the life we want. But like any journey, the road to financial independence can be filled with obstacles and detours. The key to successful investing is understanding the basics, developing a sound strategy, and sticking to it, even when market conditions are challenging.

Create a plan and remain committed
Creating a financial target is one step, but having a solid investment strategy can bridge the gap between wishing for favourable outcomes and attaining your financial aspirations. It’s beneficial to reassess your investment strategy regularly, obtain professional financial advice and make necessary alterations. However, unwavering dedication to your plan can shield you from distractions caused by short-term market volatility.

Reconsider keeping all your funds in cash
The allure of keeping all your money in cash as a secure option can be strong, but it’s important to remember that inflation can erode your savings. This has been recently demonstrated with UK inflation reaching a four-decade high. Further, surging energy costs could amplify inflationary impact and drain economic growth. For those with long-term investment objectives, it’s crucial to supplement cash with investments in diverse asset categories that can outpace inflation and offer superior capital growth opportunities.

Diversification is key
During market fluctuations, it’s easy to become overly concerned about certain underperforming investments, overlooking the broader perspective. While some asset classes may struggle in such scenarios, others could thrive. A diversified portfolio comprising different assets can help smooth out the volatility and prevent excessive risk exposure to your portfolio.

Start investing sooner rather than later
Starting your investment journey early in life enhances your prospects for long-term growth. Compound growth, which allows an investment to grow through reinvested earnings, is a potent tool but requires time to yield results. The optimal time to invest is when you have a clear financial plan that necessitates growth.

Resist the urge to act impulsively
Some investors fall prey to ‘activity bias’, an impulsive urge to take action during a crisis, regardless of whether that action is beneficial. When investments depreciate, deviating from your plan and selling them off is tempting. However, this could be detrimental as it prevents you from benefiting from potential price recoveries. Market cycles are inevitable, involving both good and bad years. Short-term market dips usually even out in the long run, increasing the likelihood of robust returns.

Personalised strategies are essential
Every investor has unique needs, and while the tips above provide a general guideline, nothing beats a strategy specifically designed for you. Moreover, during turbulent times, professional financial advice can help remove emotional bias from investment decisions and provide an unbiased perspective. This is the most valuable investment you will ever make.