Two golden rules of investing

Jaimee Thomsen and Rohan Graaff are investment advisers with Craigs Investment Partners. They share two simple, but not easy golden investment rules and their view on the role of a good financial adviser.

Change is the only constant in life. As a result of changes in your personal situation and challenges faced, the needs and reliance on your money will evolve over time. Life doesn’t move in a straight line, so it pays to have sound financial objectives and a good financial adviser to help you move towards your end goal. When investing we believe there are two important rules to always keep in mind. Following these should set you up well to succeed.

1. Any good adviser will advise you to diversify.

A fundamental rule of investing is not putting all your eggs in one basket. It’s the simplest yet most effective way to insulate against risk and help investors weather any storms. This means looking at all your investment assets and your exposure to risk in each of them. Diversification could mean looking at a combination of cash, bonds, equities as well as listed and unlisted funds, to get the right blend of assets for each investor’s portfolio, says Craigs Investment Adviser Jaimee Thomsen.

“New Zealanders are traditionally very exposed to the property market and as recent times has shown, any asset can experience fluctuations in value. It’s crucial to spread your risk and cover your bases, rather than being too concentrated in one particular asset.” says Jaimee.

2. Have a good investment strategy and stick to it.

As Craigs Investment Adviser Rohan Graaff explains, this second rule might sound simple, but it can be much harder to follow in practice.

“Setting a strategy involves more than choosing a diversified portfolio of investments. It’s a plan of action tailored to the individual for the good times and hard times. It’s a consistent and disciplined approach which manages risk, focuses on the determined time horizon, ensures that investments are suitably diversified, and adapts to market changes over time.”

“It’s a fairly common misconception, but the role of a good adviser is not to try and predict the path of financial markets. It’s about constructing your portfolio in a way that grows your wealth based on your goals, needs and risk appetite and is sturdy enough to withstand changing market conditions.”

“As investment advisers we often act as gatekeepers to protect against irrational ideas or trades resulting from short-term market fluctuations to help you stay on course and keep your investment portfolio aligned with your plan, regardless of what is going on around you. Some see us as their money coach, an educator or a business partner.”

This article was also featured in the Bay of Plenty Business News, read it here >

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