May 21, 2013

Establishing an investment portfolio can be a great way of spreading risk and generating income with minimal effort. This does not mean however that you should enter into it with abandon, as due care should always be taken to protect your finances; particularly in a time where most of us cannot afford to throw away valuable cash.

Have clear goals

You should always have a reason for investing. Whether it be to buy a new house, pay for your retirement or fund a holiday; you should always have an end goal to aim towards and keep your mind focussed. This can help you decide how much money to invest and – perhaps more importantly – when to bow out. It can become all too easy to allow previous successes to spur you on to invest more money than you need to.

Don’t act on your pride

Sometimes when you begin to lose money on a particular asset, there can be a temptation to hold off in the hope that its performance will improve and your decision will be justified. This can lead to major loses of money and no amount of pride is worth ending up with an empty bank account.

Invest in what you know

Do not just invest your money in a particular asset because the opportunity arises; you should always have an understanding of where your money is going and the risks involved in that particular area. It also helps to keep up to date on financial news too, if you’ve decided to make an investment in gold for example, to ensure you make informed decisions about when to increase or reduce your investment based on its performance, so understanding your assets, whatever you choose is crucial.

Spread your money

However good an opportunity may seem, it would be a mistake to invest all your money in one place. What is worth a fortune one day can crash the next and so you should always spread your money among a diverse range of different assets to minimise the risk. From gold, to antiques, to the more traditional stocks and shares; the possibilities are endless.

Invest what you can afford to lose

Even risk takers should always ensure they retain enough money to be able to survive on a day-to-day basis. Essentials such as rent, food, clothing and bills must always take priority over investments, with surplus cash retained at the end of each month then becoming suitable to utilise on your portfolio.

Invest when the time is right

There may come a time when you have saved enough money to be able to invest but you cannot seem to find a suitable place to put it. This is where you must have patience and continue to scan the market until you find the right asset for your cash. Rushing into any old investment purely because you have the money can lead to a hefty loss, putting you right back to square one.

Monitor your money

Advice suggests you should avoid moving your money too regularly. reducing costs and allowing your money time to grow. You must however keep track of where your money lies; it could be a costly mistake to place money in an asset and forget about it; as whether you fail to reap the fruits of its growth or to notice the hit of its failure, you will lose money you could otherwise have retained.

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