1. Start early
- the sooner you invest, the more time your money will
have to grow. If you delay, you will almost certainly have to
invest much more to achieve a similar result.
2. Keep some cash aside
– it is always a good idea to have some money set aside in case
of emergencies. Enough to cover three months’ living expenses
is often a rough guide to how much you need. And make sure
you can withdraw it when you need to, without penalties.
3. Ask yourself how much risk you can take
– there is no point having a stock market investment if you are
going to lose sleep every time share prices go through a rough
patch. It’s vital that you are realistic about your appetite for risk –
an Investment Adviser may be able to help you decide how much
risk you can tolerate.
4. Bear in mind that inflation will eat into your savings
– returns on risk-free cash investments may sound respectable, but
when you subtract the current rate of inflation you may not be so
impressed. For significant long-term growth you need to make
your money work harder.
5. Think carefully about how long you will be investing for
– only look at the stock market if you are prepared to put your
money away for five or ten years, or perhaps even longer. If you
are likely to need your money any sooner, keep it in a lower-risk
investment so there is less chance of a fall in value just before
you make a withdrawal.
6. Spread your money across a range of investments
– Don’t put all your eggs in one basket.
it’s rarely a good idea to have all your eggs in one basket.
Depending on your goals and attitude to risk, you will probably want
to spread your money across different types of investment – equities,
bonds and cash. You may also want to diversify within each of these
categories. An equity fund, for example, will invest your money in a
variety of companies but you may want to ensure you have a range of
industry sectors too.
7. Invest regularly
– investing regularly can be a great way to build up a significant lump
sum. You will also benefit from what is known as rupee cost averaging.
This means that, if you are investing in a mutual fund, over the years,
whether the market goes up or down, you will pay the average price
for units.Invest systematically, through the ups and downs.
8. Choose your funds carefully
– you should select investments based on your personal
circumstances and goals. If you are investing in a mutual fund, don’t
opt for the flavour of the month, unless you are sure it will be right for
you in the future. Don’t assume all funds investing in Indian equities
are the same – look at what a fund invests in and check if you are
comfortable with its investment style and objectives.
9. Remember that time not timing is the key to successful investing
– when planning an investment, it can be tempting to wait for the
market to drop. But you run the risk of missing out on the rises that
often occur in the early days of an upward trend. In Fidelity’s
experience, even the experts cannot “time the market” consistently
well. It is better to choose an investment that you feel confident about
and take a long-term view, so that you have time to ride out any ups
and downs.Think time in the market, not timing the market.
10. Review your investments
– a portfolio that is right for you at one point in your life may
not be quite so suitable a few years later. Your investments
need to adapt to changes in your circumstances, such as
getting married, having children or starting a business. It’s also
a good idea to check that each of the funds in your portfolio
is living up to your expectations. Talking to an Investment
Adviser could help you decide whether you need to switch
money between funds.