19 May 2020

The six key principles of successful investing

The six key principles of successful investing

Planning for the future often means finding a balance between savings and investments.

You may be saving for your children's future education costs, looking to generate income from your capital or make provisions for retirement.

Whatever your reason for regularly saving or investing, Aberdein Considine can help make sure you are making the most of the options available.

Finding the right strategy is key - and following our six key principles can help you reach your long-term financial goals.

1) Have a plan and stick to it

It is one thing to have a target, but a sound financial plan can be the difference between simply hoping for the best and  actually achieving your goals.

You can review your plan regularly with your financial adviser and make adjustments when necessary, but staying focused on your plan will help you to not be distracted by short-term market uncertainty.

2) Think twice before putting your money in cash

Putting your money in cash can seem appealing as a safe and secure option – but inflation is likely to eat away at your savings.

For most people with longer-term investment plans, cash needs to be supplemented with investment in other asset classes that can beat the perils of inflation and offer better capital growth potential.

3) Diversify and always consider your investments as a whole

When markets are fluctuating, it’s all too easy to worry about the performance of certain investments while forgetting about the bigger picture.

But when one asset class is performing poorly, others may be flourishing in the same market conditions. A diversified  portfolio, including a range of different assets, can help to iron out the ups and downs and avoid exposing your portfolio to undue risk.

4) Start investing early if you can

As a general rule, the earlier in life you start investing, the better your chances of long-term growth.

Compound growth (the ability to grow an investment by reinvesting the earnings) is a powerful force but it takes time to deliver.

The right time to invest is when you and your financial adviser have formulated a clear financial plan that requires growth.

5) Be brave in the bad times

Many people suffer from what behaviorists call ‘activity bias’: the urge to ‘just do something’ in a crisis, whether the action will be helpful or not.

When investments are falling in value, it can be tempting to abandon your plans and sell them – but this can be damaging because you won’t be able to benefit from any recovery in prices.

Markets go through cycles, and it’s important to accept that there will be good and bad years. Short-term dips in the market tend to be smoothed out over the long term, increasing the potential for healthy returns.

6) Get at tailored plan

Every single investor’s needs are different and, while the points above are good general tips, there’s no substitute for a plan that’s tailored specifically for you.

What’s more, in volatile times, advice can help you take the emotion out of investing and provide an objective view. It may just be the best investment you ever make.

If you are planning your financial future, Aberdein Considine can offer you the support of some of Scotland's most talented and respected independent financial advisers.

Click here to speak to one of our advisers.

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