10 top tips for the smart investor

Investing for profit is becoming increasingly difficult in a world of low interest rates and stock market instability but there are still gains to be made. You just need to be a bit more careful with your assets.

Here’s a list of investment rules to help you make the most of your portfolio:

Don’t put all your eggs in one basket

As the old adage goes it makes sense to spread your investments – by doing so you spread the risk and increase the potential for higher returns. You should never be over-exposed in one sector – if it struggles or falls, your investment will go with it. Remember, diversification is the key to mitigating any losses.

Do the paperwork

Keeping neat paperwork for your investments is vital because you can quickly judge when it’s necessary to make any changes.

Remember – you can’t avoid risk

It would be great if we could have ‘risk free’ investments but there is not really such thing. You have to balance the choice of not taking enough risk to help build profits or not risking your assets enough.

Manage your tax

Paying less tax on your profits means you make more money. Make use of things like ISAs and pensions. For instance, with ISAs there’s no tax payable on capital gains – and you can put £11,280 in for this tax year. Take proper advice because tax rules change.

When to buy shares

The maxim is to buy low and sell high – it seems obvious but it’s an essential thought to remember. Also, if an investment area is popular, it probably means it is overvalued. Boring investment areas generally bring the best long term returns.

When to invest?

There is no good time to invest – but those who do so regularly tend to do better.

Understand the investment

You’ll have to get used to the terms being used to describe investments so you understand exactly what it is you are buying.

Be patient

The vast majority of investors don’t make quick returns – they come over time, so show some patience. Research shows long held investments are the most profitable.

Cash

Having cash will reduce your portfolio’s volatility in trying markets and will enable you to invest quickly rather than having to sell of other assets first.

Don’t be a sucker

It’s all too easy to be taken in by a scam – so if an investment sounds too good to be true then it probably is. Even the most experienced investors get caught occasionally.