5 tips to avoid making bad investment decisions
Making Investment Decisions Can Be Easy
While most of us do not have a crystal ball to predict the future, there are some things that you can think about before making an investment decision.
It is important to be objective and try to look at the long-term picture when making decisions about where to invest your hard-earned money.
Chatting to a financial planner is always helpful as they will have industry knowledge that will assist you when considering your options.
1. Look at the big picture and don’t just make decisions in isolation.
Diversifying your portfolio allows for more return on investment in the long run, as you are not relying on one single option to earn you money. Make sure that you consider investments in several sectors.
Instead of going all-in with one investment, it could be better to stay informed about a wide range of options that can complement each other, helping diversify your risk and ensure you achieve your long-term goals.
2. Establish your goal horizon, then make decisions accordingly.
Long term investments are just as important as short-term investments. By ensuring that you have a diverse portfolio, you can minimise the overall risk. Make sure that you have considered all your options when seeking short, medium and long-term returns.
3. Don’t just follow the crowd or do what’s comfortable.
A good investment strategy is to buy low and sell high, but if you follow the masses blindly, it’s easy to end up buying high and selling low.
Do the required research into what you are investing before making a financial commitment, so that you are aware of any potential weaknesses or investment values. It is always better to make sure that you understand fully what you are committing to.
4. Don’t trade too frequently.
It can often be a good idea to wait a few days before executing a big financial decision. Seek advice from professionals and make sure that you are making informed decisions so as not to put your investment at risk through knee-jerk investment trading reactions
5. Don’t invest money that you cannot afford to lose.
It’s important to keep cash on the side for life emergencies and opportunities. You may not feel happy having some of your money just sitting there, not earning any returns, but having all your money tied up in the market is a risk that’s arguably not worth taking.
To help you make healthy financial decisions, make sure that you have evaluated your overall monthly spend and then only contribute a percentage of your monthly income, that you can afford, to investments. Establish some realistic targets, such as aiming to save a certain amount of money by the end of the year. This will also ensure that you are practicing the art of saving and ensuring healthy financial habits.
By taking into account these 5 tips and chatting to a professional regarding your financial future, you are more likely to end up with a healthy and manageable financial portfolio that will ensure you and your loved ones are financially secure, for years to come.