It is vital you research each area of investment that interests you; the more you know the better your chances of making a profit. But before making any decisions about how or where you'd like to place your investment capital, take time to undergo some financial self-analysis. Specifically, what you need to ask yourself is, 'What is my response to risk?'
Low risk investors favour high interest savings accounts and government bonds, as they seek to preserve wealth and hates volatility.
Medium risk investors like blue chip stock when balanced with Triple A bonds, preferring a broad spread of investment classes.
High risk investors are happy to go for broke in emerging markets, they thrive in volatile circumstances.
Top tips for investing
- Indulge in a little financial self-analysis. Start by outlining a detailed plan of your financial objectives. What do you want to do with your money? By clearly identifying your goals, you will find it easier to pick the appropriate investment vehicles to achieve them.
- Review your plan regularly. Check that your strategy is delivering a proportionate balance between risk and return.
- Research the four main asset classes - equities, bonds, property and cash deposits. Understand their fundamental characteristics. This will help you to find the right mix of asset classes for your portfolio - a mix that matches your risk appetite with your financial objectives. Risk is a necessary element of asset management and one which all investors must build into their investment strategy.
- Always consider the downside to any investment opportunity as it is presented to you. Worthwhile decisions can only be made when the risk-reward ratio has been worked out.
- Risk is managed through diversification. Ensure your investment strategy encompasses a balanced approach in terms of geographic, sectoral and stock spread.
- Timing is critical for investment success. Sometimes, when stock prices are falling, you just have to cut your losses and run. But as a rule of thumb, the longer your investment horizon, the more your portfolio should be able to absorb market volatility - ‘time in’ is more important than ‘timing.’
- Remember that past performance is no indication of future outcome. When choosing investments which have generated strong returns don't assume such momentum will continue. Investigate all the factors which have driven previous growth and ask your investment manager whether those factors are sustainable over the longer term.
- Check out the tax implications of every investment decision. Tax liabilities may impact on the profitability of a portfolio. Remember to consider any tax due in your country of residence as well as that which might fall due when you return to the home country. The extent of your liability will depend upon whether you have resident or non-resident tax status.
Request a free, no obligation initial advice to achieve your investment portfolio building according to your risk profile.
Hannah Beecham
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