investment mistakes to avoid
Maintaining the balance of lower- and higher-risk assets is important, so that the actual risk you’re taking doesn’t get out of balance with your tolerance to risk. Rebalancing brings a dual benefit: it reduces volatility and is likely to produce a better return. A balanced portfolio of funds chosen 10 years ago would have generated
An investor’s risk tolerance is a measure of their temperamental willingness to take on risk, while their risk capacity is their ability to recover losses if they incur them. A 35-year-old has a higher risk capacity than a 55-year-old because if the market falls 20 per cent they would not need to increase their annual
The most obvious example of investors following the herd is the technology boom of the late 1990s. At that time, sensible investment strategies went out of the window and even pensioners relying on their investments for income were selling corporate bond funds and moving into technology, not wanting to miss out on the easy money.
The financial industry oversimplifies investing and sells market timing as an effortless path to riches – even in tough times. Market timing seems so easy in hindsight. What’s more, plenty of professionals — including brokers, advisers and investment newsletters — stand ready to offer you guidance on when to trim your exposure to stock funds
Any wise investor knows the basic principle of investment: buy low, sell high. However, investors often ignore this rule, as they get swept up in prevailing market sentiment. When markets have stormed ahead, sentiment is positive and people are more likely to invest as they don’t want to miss out on further gains. Conversely, when