Over the years one of the most common financial questions I have been asked has always been ‘do you have any investment tips?’ My normal reply is always a resounding ‘not really’. Most people asking this question just wanted a guaranteed money-making scheme that will give them some immediate results. Now, for the record, quick fix investment ‘tips’ are totally useless, a waste of time and money, and are usually based on here say, if anything at all!

So, in lieu of being unable to hand out ‘money making’ pearls of wisdom, I do however have a supply of money saving tips that can do a great job assisting you to avoid losing money, which can be just as good as making money.

If it sounds too good to be true, it usually is

My number one money-saving tip just has to be ‘if it sounds too good to be true, it usually is’ Over many years as a financial planner, I must have seen every outlandish investment scheme used to coax money from investors. From’ ostrich breeding’ through to ‘jojoba bean’ plantations and everything in between. It seems amazingly easy to lure innocent investors into parting with their money. Just promise incredibly high potential returns from some very unlikely sources.

A smart investor will always expect a return on their funds. But a smart investor also knows what is achievable and what’s not. So even if everyone is telling you ‘this is the next big thing”, if it’s offering impossibly huge returns, turn it down.

The higher the return the higher the risk

This next money saving tip gives investors a real good warning of potential investment risk, ‘the higher the return, the higher the risk’. In the investment world, all returns are measured against what is termed the ‘risk-free’ rate. Usually taken from a Government bond (but a bank deposit suffices just as well) this rate represents the current investment return available with no risk. Any in- vestment that is offering returns higher than this rate carries with it the risk of loss.

When the rate is well in excess of the risk-free rate you are now talking a real big chance of loss. So always use the rate on offer as a pretty good indicator of the potential risks you will face as an investor and act accordingly. And yes, that applies even when the advertisement for the investment proudly proclaims it to be a ‘gilt-edged, blue-chip opportunity’. Read some more about this here

It’s different these days

Now if someone ever tells you that ‘the market is different these days’ just tell them their dreaming, and walk away. Why? Because share markets have always been fuelled by fear and greed and as long as this continues, they will never, ever, be any different.

Did you know that the earliest recorded share market crash was in Holland in 1637? The Tulip bulb bubble. Yes, tulip bulbs. Speculation, greed, huge profits, and lots of losers, it had all the ingredients that are exactly the same today.

History records that crashes didn’t stop at the tulips either. There have been plenty more after that. It’s certainly worth taking some time to research these events in order to really appreciate that nothing really changes. If you’re interested here’s a link to Investopedia, which outlines and explains the causes of major share market crashes.

Retirement calculators

This next one is not so much a quotation, as it is a process. I have long been a critic of investment forecasts and their associated calculators. You know, the ones where you can ‘plug’ in a few numbers and you suddenly produce a graph showing what your retirement funds will be worth in 20 years time. In fact superannuation providers, adviser groups and fund managers, actually advertise these calculators as retirement tools and have them prominently displayed on their sites.

In fact superannuation providers, adviser groups and fund managers, actually advertise these calculators as retirement tools and have them prominently displayed on their sites.

I have always wondered how someone can actually give a twenty-year forecast of your money. Then refer to it as if it was a veritable roadmap to a successful retirement. Yet if you ask about rain on Saturday, you get laughed at and told “that’s too hard”

So remember, any long-term forecast is merely a mathematical extrapolation of average returns. It is about as useful as a ‘hip pocket in a singlet’ and should never be contemplated as anything more than an absolute and total waste of time. Have a look at this post that will fill you in more about calculators.

The best way to analyze investment performance is yearly. Each year, ask yourself these type of questions; ‘did my investment make my expectations, if not, why not?’ ‘What economic conditions influenced the returns. Will they do the same next year?’ Do I need to make changes to my portfolio mix?’

So rather than relying on a spurious forecast to plot your future, just measure your progress and you alter your course should circumstances require you too.

Don’t ever fall in love with your investments

This next quote is originally from Mr. Kerry Packer, a legendary businessman and investor – ‘never fall in love with your investments,’ were his words of wisdom, and wisdom they certainly are.

There are plenty of times an investor will hold investments for far too long, eroding profits, convinced they will ‘come back’.

Alternatively, many investors have failed to take, what is a profitable selling price, believing that markets will keep going up forever – they don’t unfortunately. So, don’t ever fall in love with your investments; always be prepared to part with them.

Investments are bought by you, not sold to you

Investments are bought, not sold to you, is actually one of my own quotes. Many people get their first taste of investing by attending a seminar, staffed by slick salespeople who are usually selling in- vestment properties. These seminars are purposefully extravagant to portray money and success, the obvious fruits of any investment. Unfortunately most (I wanted to say all, but maybe there is an exception out there!) just give ‘pie in the sky’ promises and many people have regretted the day they wandered into the auditorium.

There are so many ‘hands’ between your money and the actual investment item, it requires sales prices to be ridiculously high. Don’t be fooled. If promoters need to give free inspection flights’ rental guarantees or an iPad for turning up to a seminar then you will be mighty sorry you went, I can assure you.

That is why you buy investments. The buying process should revolve solely around your personal needs, desires, and thoughts. It should also revolve around your research and ability to find suitable investment candidates. High-pressure seminar situations don’t allow for one bit of that process.

And finally, as a general rule, try not to mistake hubris for ability. It’s a good idea not to take any investment advice from your social circle. That means friends, workmates and particularly the bloke at the club ‘who has done pretty well for himself’.

We all have money but that certainly doesn’t make us experts. Steer well clear of ‘amateurs’ when deciding on your investment choices you certainly won’t regret it.

What are some of your investment money saving tips? I would love to hear them.

Thanks for reading and see you next time. Back to Homepage.