Investing on the up
In May, US consumer confidence rose to a five year high, while house prices rose 10.9% from a year earlier, the most in nearly seven years!
Residential property prices in the UK increased at the fastest pace in one-and-half years in May, as the recovery in housing demand gained strength on the back of the government's recent initiative to give banks access to cheaper credit. Separately, the British Chambers of Commerce increased its GDP forecasts for 2013, 2014 and 2015.
So, now is a good time to take stock and consider investment options. Here are my tips for those looking out for a good opportunity.
Don’t rush. Time and patience have been the great healers of investment difficulties. Panic is pointless, but you can profit when others rush to sell indiscriminately. If you can keep your head when all those around you are losing theirs, you should end up well ahead. This works the other way around too. Don’t get sucked into the buying vortex unless you’re very disciplined, with a clear and firm exit strategy.
Do the groundwork. Are you willing to do the hard work involved with investments? You can’t make gains without some pain. If you don’t want to make any effort, you can hand all your money over to a professional investment company (some will provide your tax return details as well if needed), but there can be no guarantees that you’ll get good value for your cash.
Get a handle on the odds. There’s nothing wrong with taking bigger-than-average risks that others may consider little better than playing roulette or backing horses, provided that you’re clear about what you’re doing and you can afford the losses. Don’t forget that big risks really do mean slim chances of winning. Try to get a handle on the odds.
Read the small print. Cigarette packs now have a large percentage of their surface covered in health warnings. Yet no rules exist for the prominent display of wealth warnings on investments. But even if they’re buried away, phrases such as ‘investments can go down as well as up’ mean something. Sellers and product providers will cite them as a defense if things go wrong. Take the time to read all the material and then ask what the worst possible scenario is. Get it in writing and if the reality is even worse, you may have cause for compensation.
Wake up without worries. The last 30 years have seen some of the most amazing financial-market mania ever. There was the collapse in the Japanese Nikkei Index, which has fallen by around three quarters since its late 1989 peak; there was also the bursting of the high tech bubble in 2000, which led to some stocks losing 99% or more of their value; and, the biggest of them all, the 2008-2009 bank crash, which wiped trillions (and still counting) of the world’s worth. Your investment strategy and portfolio should allow you to go to sleep happily and to wake up without worries. Sensible investing is about not losing out to insanity.
Bottom line: If it looks too good to be true, it probably is. No magic solutions exist.
Have you invested in interesting stocks and shares lately? Share your experiences with us.