Getting started with an investment portfolio can seem like a daunting task: there’s the pressure to get it right, and it can seem very complicated – but the good news is, it doesn’t have to be.
1. Start with what you know
Your knowledge of the industries in which you work, or have interest and experience, is your greatest natural competitive advantage when investing. If an investment doesn’t make sense to you, how are you going to keep it honest?
That is the principle that has helped some of the great investors of our time, like Warren Buffett and Peter Lynch, cut out the noise and create consistent long-term investment success.
So have a think about:
- What products can’t you live without.
- What excites you at work.
- The products and services you hear great feedback about.
- Whether your portfolio reflects all of the above.
2. Park your emotions
Consider what level of volatility is going to let you comfortably invest and stick to the plan! Trading triggered by emotions is one of the most common ways that investors sabotage their portfolios.
A strong temperament, in line with your risk appetite, is crucial for long term success.
3. Invest for the long-term
It can be difficult to find businesses that are great compounders of earnings with a bright long-term outlook. When you find them, let those companies re-invest and compound for you. There are hundreds of businesses, admittedly out of the thousands on offer, that have increased in value 100x or greater in 5-20 years.
To get that return, you need a long-term investment strategy.
4. Diversify
It’s possible to both under and over diversify and there are many books written on the subject.
When you’re looking at your portfolio, it’s powerful to understand where your exposures lie and whether they will provide for you consistently across the long term.
Diversification across mutually exclusive industries, sectors and geographies will reduce your total risk and lower the possibility of you losing money.
Keep an eye on it and adjust if you need to.
5. Consider your ethics
Never have the ethics of investing been discussed in greater detail than now.
The greatest long-term secular trends, and investment returns by association, are underpinned by government and community support.
The environmental, social and governance concerns (ESG) of de-carbonisation and emission reductions are a strong topical example of this, re-shaping the world that we live in.
The world of investment can be intimidating, however, if you keep these tips in mind your journey to get started will be less dauting together with getting personal advice suited to your unique circumstances.
At Cutcher & Neale Wealth Management, we are both your fund manager - investing your money daily - and your contactable direct investment advisor. Please reach out if we can be of any help with your wealth management goals.
