In the world of hobby investors and crypto-currencies, it’s easy to be left wondering if you should be jumping on these bandwagons or staying as far away as possible! Investment fads over the years have come and gone, making fortunes for a few but major losses for the rest. Tried and tested rules of investing, such as understanding and diversifying your investments have stood the test of time and here is why:
Investment portfolios are put together like a perfectly baked layered chocolate sponge cake. Acquiring all the ingredients and making sure they are measured accurately. You then need to fold them into each other (do not dare over mix) and bake at the correct temperature for a precise amount of time. If you make a mistake with one single step, you may end up with a deflated sad looking dry pudding.
So to is a tailored investment portfolio! Despite what some people may claim, no one can predict the future of the global economy (cough coivd19.) Therefore, your portfolio must be diversified to withstand even the worst baking conditions. I mean financial market conditions.
There are many principles when it comes to investing. Quality and Value are big ones that don’t always go hand in hand. Look for assets that are expected to make higher returns relative to their risks. When looking at which companies to invest in, you want them to have a solid foundation that transfers to their operations and growth. Not driven by the latest fad. This also means that their returns may take longer to deliver, which is why we need to remember that investing is a long-term strategy. Every market will suffer periodic downturns, however over time the upturn will always triumph. The rule is not to panic or let your fears affect your portfolio.
What’s that I hear? You want to make money over night? Having true diversity in a portfolio that includes these “quality” stocks means you have the opportunity to take advantage of riskier “hot stocks” or asset classes. It can provide that buffer you need by absorbing those losses, creating stability and still enables you to participate in the exciting thrills that investing can bring.
Make sure your investment portfolio is based on a solid foundation and continues to be monitored by someone with extensive market knowledge and immense experience. Don’t let your portfolio deflate like a sad sponge and call Smart Financial Advisory today on 03 9034 4883. Let us help you get the most out of your investments!