The basic rules of any first time investment are normally:
1. What is your preferred period of time for this investment?
Have a plan for the length of time to want to invest for, normally for reasonable growth a minimum period is 5 years but the longer the term the better your chances of making profit over inflation.
2. Know your risk profile (ATR) and what you are comfortable investing in
There are many tools to help assess your Attitude to Risk profile and you can find numerous online questionaires on this subject, indeed one of the first things a financial adviser will establish is the client’s ATR.
3. How much of your investment can you afford to lose in the short term?
Always have a clear idea on how much of your investment you can afford to lose in the short or medium term, this way you can spread your money according to the level of risk you are prepared to take.
4. What is your overall objective, is it growth or income?
During the early years many younger clients may want to achieve high growth or growth in excess of inflation I order to build up their wealth.
While other older clients approaching or in retirement, may want income options with additional tax saving benefits.
5. Have a good clear idea about your current tax status
With so many different investment products in the market its important to know your current level of taxable income and which products may offer more longer term benefits.
6. Always split your investment as a total percentage (%) between low, medium and adventurous funds
Its quite common for many clients to spread their investment portfolios over various types of assets from low risk securities such as deposits and fixed interests with medium risk products such as distribution, gilts and bonds right up to higher (adventurous) risk which can include various stock markets and private stocks and shares.
7. Have you learnt from anything from previous investments
Its always handy to be able to review previous investments: what went well and maybe what did’nt do well, was the timing right, the spread, etc.
8. Have a plan B if markets fall or rise sharply
Deciding on your reaction should your investment move up or down sharply in the early years is clearly an advantage, knowing how you will react gives a good indication of how to build your portfolio over the short, medium and longer term.
9. Keeping regularly reviewing how your portfolio is going
Always spend a some time maybe just a few minutes every week seeing how everything is moving, what’s doing well and why, Whats not doing well and why, whether you need to re-balance your portfolio over time to suit any change in your risk profile.
10. Remember always try to diversify
Don’t have all your eggs in just 1 basket have 40 or more baskets, if you can Try and have a good spread of investment fund managers in various market sectors not just Insurance, Banks or Mutual products.
11. Take advantage of any tax incentives for investing (ISA etc)
With the taxman giving away less and less in the way of tax incentives, it always makes real sense to use whatever tax perks that are available, such as: tax relief, allowances, thresholds, deferrals, tax free status etc.
12. Be clever, always speak to an experienced independent financial adviser
It might be good to try a few things out yourself but importantly when dealing with your most important assets such as your life savings or your pension etc then save yourself a lot of time and trouble by discussing your needs and objectives with a financial adviser, use his knowledge and experience to save you problems in the future.