Many of us avoid investing in the stock market because we're not familiar with it. In fact over 80% of all savings are cash based. With interest rates at a historically low levels, the reason why we invest in cash can’t simply be the returns – so why do we do it?
Part of the reason is the lack of familiarity. When you order a meal at a restaurant, do you go for the ‘tried and tested’ option or take the plunge and order something you have never tried before? The answer is often the former – unwilling to take the risk you fall back on what you know, even if the other option could potentially have been a better one.
We can sometimes be tempted to take a similar attitude when we think about investing in the stock market. Often we hear only negative stories and is one of the reasons why the majority of us feel uncomfortable considering it for our investments. This need not be the case if you follow some very simple investing rules.
Have a plan
You must invest for the right reasons. Ask yourself how long do you want to invest for, what the proceeds are for and what areas of the world you want to consider.
Never invest in something you do not understand
You will be upset if you lose money on something and cannot explain why.
Do not put all your eggs in one basket
Investing in one type of asset, particularly if it is doing well, is very tempting but this can be risky. Don't become blinkered in your outlook, spread your money around.
Don’t adopt a "Lemming" mentality
Copying what other investors are doing can sometimes work but it is likely that you will have missed the opportune time to invest. Read and absorb information and seek expect opinion before making your investment choices.
Re-invest your dividends
Unless you need the income, give your investment funds a timely boost by using the dividends to buy more. use the dividends to buy more.
If it looks too good to be true, it probably is
It is easy to get swept along by a tide of investment optimism and this can often artificially boost valuations. Do not focus purely on the story; ensure that the price is not over-inflated before you buy.
This website is not personal advice based on your circumstances. No news or research item is a personal recommendation to deal. Investment decisions in collectives should only be made after reading the Key Investor Information Document, Supplemental Information Document and/or Prospectus. If you are unsure of the suitability of your investment please seek professional advice.