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.
If you are resident in Spain (if you live here more than 183 days in a calendar year, the Spanish tax authorities and in turn the UK HMRC will class you as Spanish resident) and held assets outside Spain as at 29 December 2017 worth over Euro 50,000, and you haven’t already declared them on a Modelo 720, you need to so by the end of March.