Over the years one of the most common financial questions I am asked has always been ‘do you have any investment tips?’ My normal reply has always been a resounding ‘not really’ as most of the people asking this question are actually wanting a guaranteed money making scheme that will show immediate results.

Now if I did possess that kind of knowledge, do you think I would be hanging around Springwood being asked if I had any investing tips, – not likely?

So, in lieu of being unable to hand out money-making pearls of wisdom, I do, however, have a sup- ply of money saving tips that can do a great job assisting you to avoid losing money.

My number one piece of advice just has to be ‘if it seems too good to be true, it probably is’ Over many years as a financial planner, I think I must have seen every outlandish investment scheme used to coax money from investors. From’ ostrich breeding’ through to ‘jojoba bean’ plantations. It seems amazingly easy to lure innocent investors to part with their money just by promising incredibly high potential returns.

Greed is one of the greatest motivational forces embedded in our DNA. We all suffer from FOMO (fear of missing out) at some time. Add to this that lot’s of us base our investing strategy around doing what everyone else is doing which is the classic ‘investment boom’ mentality.

Therefore as a long-term investor, it is very important to be able to distinguish between genuine in- vestment opportunities and fads. gimmicks and outright dishonesty. This saying will help to re- mind you.

The next tip comes a very close second. ‘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 to the investor.

Therefore any investment that is offering returns higher than this rate, carries with it the risk of loss. That loss could be minor fluctuations right up to complete loss of your investment. Again, our greed kicks in and allows the higher rates of return disguise the actual risk of the investment. Don’t let it happen.

Oh, and that applies even when the advertisement proudly proclaims the investment to be a ‘gilt-edged, blue-chip opportunity’.

And my third piece of advice would have to be ‘don’t fall in love with your investments’. These are the words of renowned businessman and gambler Mr. Kerry Packer. Which quite simply rein- force the old adage that everything has its price. And most importantly, when it reaches that price, sell it! Often we hang on for too long, only to see our riches slowly erode as the price for our prized asset falls away.

Therefore set your investments profit target, and when it reaches it, sell. Alternatively for a more long-term perspective, set your return targets as regular milestones and maintain your investment until it starts to fail to achieve them. And remember the investment environment will change, which also changes your investment returns. Always take this into consideration during your evaluations.

And finally, always be careful when listening to the well-meaning investment ‘experts’ in your social circle. Particularly those passing hubris off as expertise.

We all have money but that certainly doesn’t make us money experts. Make sure you do your own re- search, and if you require it, consult with a professional. Stay well away from amateurs!

Thanks for reading, see you next time. Homepage