How to achieve success in your investments

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In order to achieve long-term success in today’s marketplace, building a strong and sturdy investment portfolio is vital. But because your financial aspirations and intentions will be different to everybody else, no two investment portfolios are the same.

Even so, there are a few golden rules that every investor should adhere to. By doing so, you’ll have an impressive nest egg to call upon whenever you need it and prolonged peace of mind for the foreseeable future.

Figure out how much risk you can tolerate

It goes without saying that all trading involves risk and losses can exceed deposits. But you’ll need to figure out how much risk you can tolerate and base your investment decisions on this, as there is a big difference between markets like forex and CFD (Contract For Difference) trading.

For example, the quick price movements of forex make it one of the most volatile financial markets in the world. Whereas CFD, which still requires a high level of risk management, enables you to put down a small deposit for a much larger market exposure.

Choose your asset allocation

Asset allocation means deciding how to spread your money across different types and styles of investments. These can include bonds, equities, properties, cash, and absolute return funds.

The primary reason for asset allocation is to reduce overall volatility. However, it can also increase exposure to various opportunities. At any given time, some investments will perform admirably, while others may struggle.

Select high quality funds

Quality over quantity is imperative when it comes to building your investment portfolio. Jumping on the latest and greatest IPOs for exceptional short term returns is a risky strategy if they aren’t supported by strong fundamentals.

Therefore, you should always select high quality funds in each category of your asset allocation. You can either ask for recommendations from a financial advisor or choose a ready-made selection from reputable providers.

Keep investment turnover to a minimum

Legendary investor Warren Buffet once said: “Buy a business, don’t rent stocks.” This is incredibly sound advice, as turnover has been shown to correlate with poor investment performance.

Therefore, only buy shares if you are prepared to ‘own’ that business for at least five years. You must fully understand that the stock market can be irrational and unpredictable. Make investment decisions with the long-term in mind and you’ll benefit from higher earnings per share as well as bigger dividend checks

Continually monitor your portfolio

Don’t be fooled into thinking that an investment portfolio is complete at the point you buy your funds. You must continue to measure and monitor a portfolio once invested for the very best returns and results.

After all, your asset allocation is bound to drift over time, causing some previously strong funds to deteriorate or require reassessment. Also, by periodically reviewing your portfolio, you can learn from mistakes and make more informed decisions on future investments. Even the world’s most successful investors strive to keep learning and improving.
 

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