According to a recent study by Michel Diaz Suarez, Australia has an insatiable appetite for gambling, ranking top in the world in terms of losses per capita. Our quest for a quick win can occasionally spill over into our investment attitudes. Some of us think of investing as a game of finding a ‘quick way to sudden riches,’ such as a hot tip for the next big stock market winner or where to purchase an investment property. Others will be obsessed with figuring out how to make a lot of money by exploiting the tax system.
Michel Diaz Suarez’s Top Tips
Fortunately, the true “secrets to success” in investing are far more straightforward. Here are five fundamental concepts that everyone can use to accomplish amazing achievements, even if they have few resources, to begin with.
- Take advantage of the fact that time is on your side.
Michel Diaz Suarez says Procrastination is the greatest opponent of effective investment. It deprives you of the significant advantages of compounding profits. Even with little resources, starting as soon as possible and reinvesting your returns may have a significant influence over time.
- Don’t fall into the trap of believing that time is important.
It’s tempting to believe that individuals who succeed in investing are simply fortunate to have ‘arrived at the appropriate moment.’ We occasionally read or hear in the media about someone who earned rapid money by jumping in on the ground floor of an opportunity or profiting from a market spike, but these are the exception rather than the rule.
An alternate strategy is to use the ‘dollar cost averaging’ theory. It may seem scientific, but it’s just a fancy way of expressing that making monthly contributions into your investment plan will provide greater rewards in the long run than waiting for the right time to make a huge investment.
Growth markets, such as stocks and real estate, will constantly have swings, and no one can predict what will happen next. Trying to time your investment to coincide with the ‘bottom of the market’ is therefore risky. Drip feeding over a long period of time is significantly more effective. While this means you’ll be investing at market peaks on occasion, it also means you’ll never lose out on market troughs. This approach’s ‘averaging’ effect is what makes it so effective.
- Avoid putting all of your eggs in one basket.
It’s pointless to try to predict winners. There may be the occasional share market superstar who produces fantastic returns, and we may occasionally hear of someone who has made a rapid profit on investment property, but if picking winners become the center of your investing plan, you are likely to be disappointed.
Because all investing markets will experience ups and downs, it’s far more reasonable to assess your risk tolerance and diversify across many asset classes and fund types with the goal of achieving better long-term outcomes while minimizing the impact of downturns. Because you are not exposed to the volatility of any one market or asset type, diversification is a wonderful approach to controlling investing risk and seeking greater returns.
- Be explicit about your goals and timeline.
It’s tough to make the finest investments if you don’t have a clear idea of what you want to achieve and when you want to do it. For example, if one of your short-term financial goals is to go on a trip abroad, it would be foolish to make stocks your major investment asset to attain that goal. Because the value of shares may fluctuate dramatically over such a short amount of time, the time frame makes it overly hazardous.
If, on the other hand, one of your goals is to save for early retirement in 20 years, investing solely in term deposits would (usually speaking) severely limit your options. This is because growth markets, like real estate and stocks, have traditionally fared well when assessed over a long period of time, and any short-term volatility will be offset by the long-term trend.
The idea is to match your asset class to your time horizon, thus determining your lifestyle goals before deciding on an investing plan is critical.
- Make use of specialists’ knowledge.
Entering the financial world on your own and gaining a thorough grasp of the dangers and possibilities may be a difficult job. The good news is that you are not required to do so. A professional financial planner has access to a wealth of knowledge, research, and planning tools that can help you apply these golden guidelines to your specific situation. Michel Diaz Suarez can show you a tried-and-true method for defining your objectives and then putting up a dynamic portfolio that incorporates the ideas outlined above to help you achieve financial success.
