As you begin your investment journey, you’ll come to realise that although the markets are unpredictable and volatile, that you can play your part to minimise your risks while maximising your returns.
It’s all about educating yourself always—to do your due diligence and research so that you can learn more about the relevant principles, strategies, and concepts, on top of staying informed on the performance of your investments. With the right amount of knowledge and discipline, you can sit back and watch as your wealth builds and your financial goals are achieved.
Now, in investing, there are the three golden rules that you should always live by, and that is: investing for the long term, diversification, and dollar-cost averaging. If any of those concepts are unfamiliar to you, keep reading as we walk you through each of them!
In all investments, it’s always best to aim for the long haul rather than short-term. When you invest in the long-term, you’ll be able to capitalise off the potential growth of your investments over an extended period of time, while weathering short-term fluctuations which are guaranteed to occur given the volatility of markets.
Rather than focusing on building your wealth overnight or securing quick returns, instead, direct your focus towards achieving a more significant financial goal—while it may take years, it will pay off eventually. Be patient and grant yourself more time so that you wouldn’t stress over the market, because you’ll know that you’re in it for the long run.
To add, long-term investments are excellent because you’ll be able to benefit off compound interest over time, which means that in any case of temporary downturns, you can expect your investments to bounce back and recovery in time.
In diversification, you’d be spreading your investment portfolio across different instruments that will cover varying asset classes, sectors, and regions. It is a risk management strategy, and the entire notion surrounds the idea of not keeping all of your eggs in one basket.
When you diversify, you’d be reducing your risk tremendously by not relying too much on a singular investment or specific market segment. You’d effectively balance your potential gains and losses, which means that you’re playing a safer strategy that will bring returns in the end as well. Plus, your varying investments could perform differently, which means that you stand the chance of building your wealth more by investing into a variety of instruments as well.
Dollar-cost averaging is yet another investment strategy, wherein you’d invest a fixed amount of money at regular intervals, regardless of the market’s conditions and performance. As opposed to monitoring the market on your own and deciding when to invest or not, you’d determine a set interval and amount to do so.
Through dollar-cost averaging, you’ll be able to mitigate the impact of short-term market volatility, because you wouldn’t be timing the market. Over time, dollar-cost averaging is very effective in smoothening out the average cost per share or unit, which means that you’ll be able to secure much better long-term returns as a result.
While there are plenty of other strategies that you can employ in your investment journey, the best way for you to learn them is on your own. As you manage your own investments and portfolio, you’ll eventually learn what’s best for you and what isn’t, and how you want to manage your risks and returns.
There isn’t one set way for everyone, because everyone has different goals in life. Therefore, it’s important that you decide what you want before you get started in the first place. With a goal in mind, it’ll be much easier to figure out a plan that’ll help you get there.
If you’d like to get started with investing, know that we’re all here to lend a helping hand to you! We’ll be more than glad to walk you through the basics and to teach you all there is to know about weathering the market, minimising your risks, and maximising your returns as much as possible. Simply reach out to us today!
*Disclaimer: “This article is for informational purposes only and should not be relied upon as financial advice.”