There's one piece of investment advice that will do wonders for your returns but is really hard to follow: It's to go against the crowd.
Buy when everyone else is reticent, hold on to investments through periods of shakiness and sell when everyone else is becoming very excited. It makes sense when you consider it objectively. Why would you want to pay over the odds for an investment that everyone else is clamouring to get into?
But when you try to put it into practice, it can be harder than you expect. Looking for bargains in a depressed market might not be too difficult but it takes steely determination to hold on to them when prices fall further.
Data shows that individual investors do more poorly than the indexes they are invested in partly because they time their purchases and sales badly. They sell at low points of the market and buy back in once some of the gains have already been made.
If you cave and bail out during a rough patch you solidify any losses that until that point have been only on paper. If you can stick it out and ride it back to the good times, you will end up much better off.
Decide independently what you think an appropriate return from your investments is, and what you would be willing to sell for.
This is pertinent now because, although the economy and investment markets in general have been going through a very strong period, there may be volatility on the horizon.
Fortunes may be changing for the property market.
If you check your KiwiSaver balance one day and see it has fallen a bit, do not get scared and switch to a less risky fund to protect the rest of your balance.
Instead, look at the volatility as an opportunity for your investment to pick up more units, which will then shoot off in value again once the volatile period passes. Knowing your plan and sticking to it is the best thing you can do for your investing outcomes.
Jeremy Tauri is an associate at Plus Chartered Accountants
By Jeremy Tauri
Phone: (09) 438 3322
Fax: 438 8455
134 Bank Street, Whangarei
If we had to sum up Brent and the team at Plus CA it would be - humorous, efficient, professional with a real focus on making your money work to its best ability for you...we will continue to deal with them even though we are moving overseas as we know they have our best interests at heart.
Jeremy thank you for your patience, assistance and general chit chat over the years. I would have absolutely no issue in recommending your services to everyone and anyone – in fact, I do.
We recently employed Jeremy Tauri of Plus Chartered Accountants and have been thrilled with the improved service we have received. Jeremy is really approachable and always available to answer queries. At his instigation we have set up quarterly meetings so that we are regularly reviewing our business and avoiding any ‘end of year surprises’.