With interest rates at low levels and a series of measures making buy to let a less lucrative investment, it’s understandable that many people will turn to the markets to make their money go further.
Diversity is key
You cannot afford to rely on one or two types of investment. Doing so will mean that you are incredibly vulnerable to a downturn. By building a portfolio of a variety of different assets – from currency to commodities and stocks and shares – you should build in a level of protection, as well as widening your scope and the number of opportunities you have for growth.
Do your research
You might well choose to rely on a fund manager to manage your assets on a day to day basis, but it still pays to know what you’re talking about before you begin. There’s so much information available online that it really doesn’t make sense not to do a little research. So, don’t dabble in Dax futures without looking at what Germany’s top 30 countries have been doing in recent months and years.
Stick to your guns – and be aware of the cost
As The Balance notes, there’s a wise old saying when it comes to investing: ‘Don’t rent stocks, buy businesses’. If you can’t see yourself owning shares for five years then you shouldn’t really consider them in the first place. Your investment portfolio should be a series of assets that you have confidence in over the medium to long term – they aren’t some sort of short term lottery ticket to make a quick fortune. You also need to avoid paying out too much in fees and charges – something that will come along with changing your mind on a regular basis. You also need to be aware of the ongoing costs of an asset when you first take it on – don’t get caught out.
Set your goals
Speaking of which, you need a plan for your portfolio. How much money do you hope to make? Are you working towards a specific goal – a target retirement fund or the money for that holiday home in France you’ve been eyeing up? If you know how much you want to make – and when you need to have made it by – it might well guide your investment choices. Importantly, this also helps to define what success looks like for you.
Finally, you need to appreciate the fact that every market investment carries a level of risk. You need to be sure that you are comfortable with this – and that you have factored in a ‘worst case scenario’ should things not go to plan.
A diverse portfolio, backed up by strong research, with clear goals, an acceptable level of risk and a clear head is a good formula for your investment portfolio. Embrace these points to ensure you meet your financial goals.