Every time I sit down with these clients to work on a new strategy, I am reminded of just how easy it is, without the right levels of education, experience and discipline, to go wrong. Below I have taken my experience of common investment mistakes and converted them into “teachable moments”.
Take your time
Too often investors make decisions in a hurry. Sometimes this is because they mistakenly feel that finance should be fast-paced and adrenalised in the stereotypical Wall Street style. More often it is because they feel pressure – either internally, to get things right, or externally, because an adviser is attempting a hard-sell or offering an unconscionable inducement. Yes, begin investing early, but take your time. Financial plans should be about long-term security rather than getting rich quick.
Be wary of hype and unrealistic claims
If something sounds too good to be true, then it probably is. Wildly optimistic “guaranteed” returns should be treated with extreme caution. Always check the credentials, qualifications and regulation of the adviser and read the small print before signing on the dotted line.
Don’t chase heat
Anyone familiar with the tech crash or the experience of cryptocurrency investment during 2017-18 will understand the pitfalls of investors chasing “hot” stocks in droves. The top 10 cryptocurrencies nosedived by 80% during 2018 and who was hit hardest? Yes, those investors who bought cryptocurrencies when they were seemingly “hotter” than ever before.
Diversify, diversify
We all know that it is a bad idea to put all our eggs in one basket, yet time and again investors are prone to doing just this. Whether they are showing home bias by overly investing in British stocks or placing their hopes in a single asset class, investors the world over fall prey to this basic error all the time. Diversify your portfolio so that you are protected from losses in one major area and you could avoid devastating devaluation of your assets.
Review and reflect
Although we all wish to stay disciplined to our long-term financial plans, it is essential that portfolios are regularly reviewed to account for performance, outlook, regulatory changes and the evolving tax landscape. Also, it is conceivable that your goals and personal circumstances might change, particularly if you are an expat and have cross-border concerns.
Remain objective
Your mate Barry may recommend investing in buy-to-let property in Timbuktu but that doesn’t mean it is necessarily a good idea. With the advent of the internet “hearsay” financial advice can be found everywhere, but there is still no substitute for the expertise and objectivity of independent financial advice that is tailored to your precise situation.
Blacktower Financial Management, making a difference
Blacktower Financial Management has more than three decades of proven expertise providing financial advice and wealth management services to our clients. We can help you avoid making some of the most common investment mistakes and help you weather the storms of economic volatility such as through Brexit.
Contact us today for invaluable professional help so that you have the best possible chance of reaching your financial goals.
We believe that you need to do your homework before making any investment decision. That may include reading financial publications, researching online, and discussing options with your friends and family. Many people, however, find the task of selecting investments too daunting to undertake on their own. To invest responsibly, they do their homework, and they seek the professional guidance and advice of a financial adviser.
The later part of the 20th century saw its fair share of financial bubbles. There was the property bubble, stock market bubbles, and then the dot com bubble of 2000, just to name a few. In each instance, people paid exorbitant amounts for things that shouldn’t have been worth anything like the going price. But this is nothing new – look back at the Dutch in the 17th century when already pricey tulip bulbs experienced a twentyfold price explosion in just a single month.