31st December 2013
Adrian Lowcock, senior investment manager at fund broker Hargreaves Lansdown gives five key tips which might help investors have a more profitable 2014 and beyond:
Diversify – In any one given year it is difficult to predict which market will perform best. Spreading your investments into a range of different asset classes and funds makes sense. There are four main asset classes; cash, equities, fixed interest and property, so somewhere between 10 and 20 funds should be enough. Anymore funds and it will reduce the effectiveness of each fund on portfolio performance.
Play to your strengths – Don’t spend time and energy on things you are not good at or don’t have the resources to do well. There are plenty of tools and research available to investors, to help achieve your aims and investment objectives.
Learn from your previous mistakes – Admitting mistakes is very difficult, investors often forget their bad investment decisions as they don’t want to draw attention to them; however it pays in the long run to look at where you went wrong and why, so you can avoid the same mistake in the future.
Don’t follow the herd – Investors, and people, tend to have a herd mentality, so when markets fall investors sell out only to buy back in once the market has risen. It is difficult to break this habit, as human nature makes us want to sell in times of stress or high risk, but the reverse is usually more rewarding as you will be buying low not selling low.
Follow the manager not the fund – At Hargreaves Lansdown we look at the fund manager not the fund. This approach means you look at the fund’s performance that is attributable to the manager not just the fund. However it is important to review the fund when a manager leaves and decide if the incoming manager is worth investing in or is time to look for another fund.