Welcome back for Part 2!  We hope that the 1st part of this 2 Parter was helpful and interesting.  These 2nd 5 Tips will help you just as much so have a look, take some notes and use them as you see fit.  Enjoy!

  1. No matter where you invest check out the fund manager before you make any decisions.  This means checking their credentials, their long term performance, their goals (and how they align with yours) and their reputation.  Keep in mind that even the best fund manager will sometimes have an off year and underperform occasionally and try to look at their long term results.  If they have been very successful but recently took a slight dip that shouldn’t spell major problems in your eyes.
  2. Remember that fads are for rock stars and children, not for smart long-term investors.  The dotcom crash in 2000 is an excellent example of people following a fad and then getting burned. Whenever you’re looking for an investment opportunity take your time, do your due diligence and do the research needed to make sure it’s a good opportunity. Technology is back in favor now, for example, but it’s still volatile and still not the best choice.
  3. When looking at past performance of any investment opp don’t focus completely on its past performance.  This is certainly an indicator of  how it might perform but is definitely no guarantee. Because of the simple fact that markets are cyclical it means that a great performer in the past may not be the best in the future. Again this goes to due diligence and research that you need to perform.
  4. Investing monthly to smooth out crests and lows is a better idea than investing once or twice a year.  It’s called ‘pound-cost averaging’ and will reduce the chance of any volatility in the market wiping out all of your gains in one fell swoop.  It’s a basic principle that many use.  Yes the amount of units you purchase 1 month may be less than another but, at the end of the year, they should even out.  In most cases you will end up paying less per share than the market average.
  5. We mentioned this before about putting all your investments only in the United States and that you should spread them out internationally.  Do the same with you investment overall and don’t, as they say, ‘put them all in 1 basket’.  Invest in a number of different companies or funds so that if one fails you still have the others to keep your portfolio afloat and healthy.

And that’s it.  10 excellent Tips that should help the new investor with their decision making process.  We wish you the best of luck with them and also suggest that, no matter what you do, use common sense, ask as many questions as you can, get advice from trusted sources and look at the whole picture long-term for the best results.  See you back here soon!

Filed under: Investing

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