Key Investment Principals that you need to know.
6. Diversify Internationally.
Holding a globally diversified portfolio can broaden your opportunities beyond your home market, putting you in a better position to capture the winners and higher returns wherever they happen..
8. Managing Emotions.
When markets go up and down, many people struggle to separate their emotions from investing. Reacting to current market conditions may lead to making poor investment decisions.
10. Control what you can control.
Work with a qualified financial advisor to stay focused on actions that add value. While you can’t control which way the market will turn, following time-tested principles can lead to a better investment experience.
1.Embrace Market Timing
Financial science teaches us that ‘the market’ is an effective information-processing machine.
Each day, the world equity markets process billions of dollars in trades between buyers and sellers each with their own thought ideas and expectations.
The collective knowledge and decisions taken set the prices of assets.
2. Don’t try to outguess the Market.
The market’s pricing power works against fund managers who try to outperform through stock picking or market timing.
Only 12% of US-domiciled stock funds and 17% of bond funds have survived and outperformed their benchmarks over the past 20 years.
4. Let Markets work for you.
The financial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and the stock and bond markets have provided growth of wealth that has more than offset inflation, as this chart of the past 50 years shows.
3. Resist Chasing Past Performance.
Some investors select funds based on their past returns. Yet, past performance offers little insight into a fund’s future returns.
For example, most funds in the top 25% of previous five-year returns did not maintain a top-25% ranking in the following five years.
5. Target Higher Returns.
Academic research into decades of stock and bond returns has identified long-term drivers of outperformance. By investing systematically in the areas with higher expected returns, you can aim to beat the market.
7. Avoid Market Timing.
Research has shown there’s no reliable way to time the market. Targeting the best days to be invested or moving to the sidelines to avoid the worst days simply doesn’t work.
It has also shown the impact of being out of the market even for a short time.
Staying invested helps ensure you’re in position to capture long-term gains.
9. Looking Beyond the Headlines.
Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future, while others tempt you to chase the latest investment fad.
When headlines unsettle you, consider the source — is it news or entertainment? Do yourself a favor and tune out the noise.
