No matter where you go there is always someone giving you advice about how to look after your money, how to make more money, how to make a ‘killing’. The chances are you know and trust these people implicitly, they may be your best friend, someone you know who has a successful business or even your Dad. Over the years I have heard also sorts of money advice tips and here are a few that you may wish to be careful about.
For the record, my Dad was a very savvy investor and much of what I know today, I learnt from him. Oh and the other bit of advice from him was, “go for a run every day”, but that doesn’t help here.
Top tip No. 1
- “Buy low, sell high.” This one is so logical and really quite impossible to argue with, because if you could do it and you get it right, you would be very successful and most likely living an exotic Caribbean island. The problem though, is that it is virtually impossible to perfect this investing strategy. The reality is that no one can call the bottom or even the top of the market. Even the very best, would never suggest that they could do this. Many people have tried to do this over the last century and fortunes have been lost trying to time the market.
A far more effective investment strategy is to build a portfolio of diverse investments that you hold and own for the long term. Probably the best proponent of this style of investing is Warren Buffet, who has historically owned investments for decades.
Top tip No. 2
- 2. “Buy this share, it’s about to double or treble in value.” Over the years we have probably all had this kind of share tip, whether it is from, the man down the pub, a business colleague or even from a share tip sheet. If you act upon this kind of advice, the chances are that you are doing it with any consideration to the facts. Action is just taken on a hunch. Most of these tips prove to be false and even if they do rise substantially, by the time you get the tip it has already happened.
Building a steady and solid investment portfolio is the key to long term success. It may not be exciting but it is often the boring long term strategies that are likely to bring you long term benefits and gains. So being boring is the name of the game.
Top tip No. 3
- “Only invest in Blue Chip companies.” Many investors choose to invest only in what they perceive as the top blue chip companies. Often the perception is that the dividend payments will be consistent and over time will increase. Consistent they may be however in recent years even the very best companies have been unable to sustain the dividend payments. A great company is sure to give me great returns. However many blue chip companies do not necessarily make great investments. Often these companies are very mature and have reached their optimum level of performance, so chances of them growing substantially are limited.
Companies that offer growth potential and have value are far more likely to give you better than average investment returns that a wealthy blue chip company. Often companies that are younger but well established are likely to offer better value and better growth prospects
Contact Martin Dodd on 01902 742221 or email him at [email protected] if you would like talk about money issues for your grandchildren.
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