Adrian Lowcock, Head of Personal Investing at Willis Owen, suggests five rules for investors to live by in the New Year:
1. Only buy something that fits into your portfolio – Fund ideas and recommendations are not usually bespoke to individual investors. Therefore, it is important to think about how a new fund purchase would fit into your portfolio. Ask yourself how it will affect your risk exposure, liquidity and diversification. Don’t be easily lured by clever marketing material, and instead seek professional opinion on the fund’s ability to meet your individual goals.
2. Diversification – This is one of the fundamental principles of investing and it is about ensuring you have the right mix of assets in your portfolio. Make sure you have a mix of bonds, equities, commodities and other investments that match your risk appetite. Achieving the right asset allocation is the most important factor in realising investment returns.
3. Review your investments – A surprising number of investors don’t do this but it’s important to give your portfolio an annual spring clean. Reviewing your investments means you keep on top of their performance and only hold funds that suit your current objectives.
4. Buy low – It is human nature to avoid investing in stock markets when they have fallen, and while ‘buy low sell high’ is a well-known mantra, few investors actually live by it. When markets are low, investors hold off until markets have recovered and confidence returns. However, smart investors don’t follow the herd; they buy when markets are low and reap the rewards on the way up.
5. Keep making new investments – The best way to grow your savings is to use as much of your annual ISA & Pension allowances as possible. Regularly topping up your investments means you can spread the timing of your investments and increase the amount invested, which should help boost returns.