In you are a first-time investor you may be daunted by taking a step into the unknown, especially if you have heard something about the potential risks, but not enough to be certain you can avoid them.
At Continuum we are looking at first-time investment mistakes – and how to avoid them.
Not having a strategy
You can’t simply decide to become an investor and go out and buy some stocks in businesses that you like the look of. Investment is not a matter of luck, and certainly not about picking out investments at random. It needs a coherent strategy, which removes the guesswork and turns investment not just into a planned route to your goals, but one with quantifiable progress mileposts along the way.
The planning starts with understanding what you want from your investment. Capital growth or income, or a combination of both. What risk can you afford, what are your timeframes, what are your wealth targets and what can you commit to reach them?
You need to know the answers to these questions – and understand the impact they have on the investments that are right for you.
Not understanding risk
There are no guarantees with investment. Any investment opportunity carries some risk, and the general rule is that the greater potential returns, the greater is the risk.
But some risk is actually desirable. Without some risk you may not be able to reach your wealth targets.
You must understand the risk inherent in each investment you make. A UK government bond is seen as low risk, while shares in a small business enterprise may be much higher risk.
Ideally, you want a portfolio made up of investments with a range of risk. How that portfolio is made up will depend on your attitude to risk, investment strategy and such factors as the time you have to reach your wealth goals.
At Continuum we can help you understand this better through our attitude to risk questionnaire, enabling you to feel comfortable with the level of risk being taken and give you a greater understanding of the objectives of your investments.
Not having diversified investments
Whatever your view of risk, you can never put all your investment eggs in one basket. You need a diversified portfolio made up of different types of investments. When one part of the market dips, another will hopefully be rising, covering your losses.
Again, we can help by carefully planning how your portfolio is diversified to reflect your attitude to risk and your investment strategy.
Not investing for the long term
Investment works because it lets you buy shares in companies and share in their potential profits. This does not have much effect in the short term, when volatility in the price of investments can hide any gains. Investing for a minimum of five years can offset the ups and downs, letting any underlying growth in the value of your investment work for you.
Day trading, with buying and selling to try and ride market movements is best left to investment professionals – those with money to spare.
Investment knowledge to help you
We can provide the expertise you need to succeed at investing. To find out more about getting our knowledge working to build your wealth, contact us today.
Not getting expert help
Our experts can combine an individual strategy that is right for you with up to the minute market understanding to put it into practice. It means that we can help you plan the style of investment portfolio you need, and help you keep it current, and performing as it should.
We can help make investment easier with our expert advice team, who will help navigate you through the world of investments.
We can also give you individual support from an adviser who may help you avoid investment mistakes – and help you potentially build the wealth you want.
To find out more, simply call us.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.