Regardless of how the stock markets are doing in the short term we found its always wise to keep a long term view when it comes to investing. We’ve set out a few thoughts on how you can avoid making some very expensive mistakes.

Don’t try and time markets

This is a mistake that many investors make. They see markets getting volatile and so they move their money out of equity funds and into cash funds… only too often to see equity markets then race ahead. Even when markets don’t increase significantly, how do you decide when to go back from cash and into equity funds? Again, we regularly see people re-entering markets much too late, having missed out on the initial rebound in a market that might have fallen.

There is a common belief today that one of the keys to investment success is “time in the market” as opposed to “market timing”. Two very different things with usually different results!

Stay diversified

Taking the above point into account, we usually recommend a well-diversified portfolio. This is the traditional concept of not “having all your eggs in one basket”. If you have your investments spread across a range of different asset classes (equities, bonds, property, cash etc.), and within asset classes across a range of geographies and sectors, you are reducing the impact on your investments of a negative event in a single market or asset class.

Keep saving

Again when markets are swinging up and down, regular savers can become cautious about investing more money. Similar to trying to time markets, we believe this is a mistake. There are ways you can continue to save while cushioning some of the volatility.

For some investors we suggest a “euro cost averaging” strategy. Using this approach, you invest a fixed amount at regular intervals. If markets are moving around, you are buying in to the market at various price points, sometimes when markets are high (expensive) and sometimes when they have fallen (and are cheaper). As a result, you are smoothing out your likely outcomes, as opposed to investing all of your money in one lump sum.

The key point though is not to make rash decisions. We are here to help you make the best decisions for you, to help you achieve your investments goals while also ensuring you’re not lying awake worrying about your money. Please give us a call if you would like us to help you stay on your best investment behaviour.