Tips for D.I.Y. investors
There is a huge amount of advice out there for would-be investors. This ranges from professional investment advice through to doing your own research online and by reading the financial press. Putting together your own portfolio of investments can be a daunting task but the below tips will help you on your way:
Get to grips with the jargon
The first step for any budding investor is to learn the financial jargon. There are a number of free internet resources that can help you to do this and also numerous books on the subject of investing.
Until you understand the jargon, you will not be ready to manage your own investments. It is essential that you understand the data you are looking at and also have a good knowledge of an asset before you decide to buy it.
Start with funds then move on to shares
Funds are investment vehicles which pool your money with that of other investors and this pooled money is then invested as per the stated aims of the fund. You can have a fund that invests in a particular share index or a fund that invests in different assets within a particular geographical location – there is a huge range to choose from. There is less legwork involved than with buying shares because funds are professionally managed.
Once you have made some fund investments and spent some time monitoring their performance, you will feel more confident about taking control of your investments. You can then allocate some of your investment capital to buy shares. Check out the Sungard.com/apt website to see the software used by professional asset managers to monitor their investments.
Buy businesses you understand
If you have decided to buy some shares then use your existing knowledge and target businesses you know something about. For example, if you are an engineer, you may choose to buy shares in manufacturing or utilities. If you work in the medical profession then you could buy shares in pharmaceutical companies or other related industries.
Some types of shares, such as those in new technology companies, are considered more high risk than others. Unless you specifically want to make a very high risk investment, you should avoid buying these shares.
If you don’t have any knowledge about a particular industry then pick one that interests you and read up about it. Once you have increased your understanding, you are more likely to be able to spot the best performing companies, and decide if you want to make an investment.
Copy the strategy of a successful fund to avoid fees
Funds are professionally-managed and there will be a fee payable for this service. If you want to avoid the fees but benefit from the fund manager’s expertise, you could try buying shares in the fund’s top ten holdings yourself. Fund managers have the benefit of professional portfolio management software such as that provided by Sungard.com/APT.
You should look for funds with consistently good long-term performance and mimic their investment strategy. This is not a foolproof way to make a profit as many funds have suffered from poor performance recently. That is why it is important to pick a successful fund with a proven track record.
Invest for the long-term
You hear stories of someone buying a pile of shares in a particular company and making a fortune -but this is an extremely rare occurrence. Most successful investors have a long-term strategy which they stick to. The amount of risk you should be prepared to take on depends on your personal circumstances and will change over time. You should sit down and think about your own investment goals and work out the right amount of risk for you – it’s a very individual thing.
It is generally accepted that a diversified investment portfolio is more likely to turn a profit. You should consider spreading out your investments across asset classes, don’t put all your eggs in one basket. If you diversify your portfolio, the hope is that any loss from underachieving assets will be mitigated by profits from your other asset investments.
What will you choose to invest in?
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