Investing isn’t a new pastime. Arguably, it predates the invention of money. For thousands of years, human beings have been recognising the potential of ideas, inventions, and one another, and investing their resources accordingly.
As such, modern investors can benefit from a whole range of time-worn investing adages and principles. These are just as relevant to the modern world as they were in the ancient one.
Time in the market beats timing the market
Over time, investments compound. A small amount of annual growth will, over decades, turn into a very large return. This might seem unintuitive – but it’s a mathematical certainty. It’s often better to stick with an investment than to try to beat the market by buying and selling.
Diversify across assets, sectors and geographies
If you put all of your eggs in a single basket, you’ll assume a greater degree of risk. Try to spread your bets across many different assets, or classes of assets, and you’ll be more secure. For example, if you’ve bought a lot of stocks in a single tech company, you’ll assume more risk than if you’d invested in the sector as a whole, and a lot more than if you’d instead bought stocks, bonds, property, and assets like gold, in many different parts of the world.
Know your risk tolerance and stick to it
How much risk can you comfortably assume? The answer will vary depending on your time frame and on your financial resources. Some might be willing to cope with losses in the short term.
What matters is that you set out the level of risk you’re willing to deal with in advance. This will help you to avoid becoming overly emotional, and making bad decisions when your investments unexpectedly plunge. Make sure also that you stay on top of regulatory changes announced by the Financial Conduct Authority.
Invest through disciplined strategies and education
If you aren’t continually educating yourself, and remembering the fundamentals of investment, then you might end up leaving value on the table. You might make regular contributions, reinvest dividends, and optimise your tax liability through the use of ISAs and other wrappers. But you can only do this if you understand the basics. Fortunately, there are a lot of online investor training courses available.
Review, adapt and remain patient
Your portfolio shouldn’t be viewed as a collection of assets that you amass over time, without pausing to reflect on why you’re doing it. In some cases, a sudden movement in the market might shock you into pausing and questioning whether your investment strategy supports your objectives. In other cases, the movement can be subtle – which is what makes a schedule of proactive review such a powerful thing.
Above all, it’s important to be patient. While stories of overnight success make for good reading, the truth is that most successful investors become successful over a period of years and decades.
