In the investment world, there are some things that hold truth whether you are a new investor or a seasoned investor. Here are 5 Keys to successful investing across the different asset classes (i.e. Equity, Cash, Property, Bonds)
1. Have a financial road-map/goal
The first key to successful investing is to have a clear financial goal. Ask yourself WHY are you investing? This will inform how long you want to invest and it will dictate the risk you can afford to take. Without a clear goal, you are susceptible to withdrawing your funds and spending it on non-income or interest earning expenditure.
The saying goes, don’t put all your eggs in one basket, and that is what diversification is: spreading your investments across different asset classes thereby spreading the risk you hold. I think this holds even more true in the South African context where our economy has been struggling. So diversification is not only investing across asset classes but investing globally in other countries too.
3. Watch out for those costs!
A lot has been said about compound interest and how it definitely works to your advantage, but most of the time, compounding costs are ignored. I cannot stress how important it is to keep your costs low when investing. This is what John Bogle, the founder and former CEO of Vanguard, an asset management company in the USA said about costs:
“The Tyranny of Compounding Costs. Fees compound over time, just like investment returns. But rather than push the value of portfolios higher over the long run, fees do the exact opposite. …”
4. Understand what you are investing in.
I can never say it enough. Educate yourself, Educate yourself. Yes, professionals are there to guide and give more insight and expert view BUT the onus is on you the investor to know what you are investing in. You are less likely to fall for scams when you prioritize your understanding of investments. Trust me, do yourself a favour and educate yourself.
5. Review your portfolio
As I have said, investing is a long-term game and even though it is, I have seen people adopt an invest and forget type of mindset, they invest and never look at the performance of their investment and track if it will meet their goal.
Reviewing does not mean chopping and changing every time, it merely is to keep track and also a reminder of what you are working towards.
I read a blog post recently that made the distinction very vivid for me the difference between saving and investing, it said: You save to spend; you invest to earn. What steps or keys have worked for you in your investment journey tribe? Where are you investing your money?
Share your thoughts.