MONEY ROB McGRUER SIX ways to investment success Successful investing takes time and
discipline. But you probably know what happens when markets are volatile. It’s easy to get off track. When this happens, it’s best to get back to basics. Here are six principles to follow:
Have a plan and stick to it Successful investing requires a game plan
and the discipline to stick to it. A good plan outlines your goals and objectives as well as the risks you are willing to take. Your plan will prevent you from taking on more risk than you should when markets are rising, and will help you make appropriate decisions when the world appears to be falling apart.
Be diversified and balanced Don’t put all your eggs in one basket.
With a balanced portfolio that includes stocks, bonds and cash, you can reap the benefits each of these assets offers. Diversification can both improve return and reduce risk in an investment portfolio. By including a variety of different companies, industries, geographic regions, and investment styles, you can offset weaknesses in some areas with the strengths of others.
Think long term With today’s higher volatility levels,
long-term thinking is more important than ever. Intra-day swings of five percent or more can make you feel like you’re missing major opportunities to enhance returns. But evidence shows that trying to time the market just doesn’t work. On average, the longer you hold equities, the better your chances of earning a positive return.
Buy and retain quality The best way to avoid pitfalls is to focus
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on quality. It’s a difficult term to define, but there are a number of good indicators. Financial stability and strength as measured by low and manageable debt levels, a stable history of profit and dividend growth, and a strong management team are some of the factors that tend to define quality investments.
Stick with winners, and sell losers It’s often human nature to sell winning
investments and pat ourselves on the back, while hanging on to losers and hoping for the best. While turnarounds do happen, it is important to distinguish between wishing for one and assessing whether it is possible or not. You’ll probably have better results with a disciplined strategy that accepts losses when they happen, and doesn’t sell winners too soon.
Review, reassess, rebalance Monitoring your investment portfolio
is just as important as creating it in the first place. Capital markets change, and so will your objectives and risk profile with wealth and age. Making the necessary adjustments will ensure that you are headed in the right direction. The process of planning, reviewing and rebalancing will ultimately ensure financial success.
Every action needs a solid plan. If you follow these six basic principles
you can improve your long-term investment success.
Robert K. McGruer is a Senior Wealth Advisor for ScotiaMcLeod™
.
(TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.)
www.bounder.ca
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