Is there a secret to making real money by investing? Well, no. Because the information is out there, all over the internet, readily available to those who are interested. Trawling through the myriad of information out there can be a painful and exhausting experience. But we are here to help. Here are seven of the best ones we’ve seen.
1: “Know the rules and only take a risk where the reward merits it, be patient and only pick the fights you know you can win.” Carl Icahn
What this means: Only invest in something you understand. Always invest for the long term and don’t try to be too clever. Traditional tried and tested methods are a much better bet than the new money making scheme that everyone is talking about.
2: “Believe in Reversion to the mean: i.e. the factors that randomly cause a fund to perform well are just as likely to reverse and cause what has performed well to perform poorly. Chasing returns is a guaranteed way of getting lower returns (if you systematically buy funds that have performed well and sell funds that have performed poorly).” David Swensen
What this means: Whilst you may make more money investing in stocks that have fallen rather than investing in stocks that have risen sharply, trying to second guess the market is an idiot’s game. Unless you’re an actuarial genius, leave the guesswork to the professionals.
3: “Get asset allocation right for your risk and diversify.” Jack Bogle
What he means: Getting your asset mix (i.e. property, shares, fixed interest, cash, bonds etc) is more important than timing the market. Having a good fund manager is key; they should know what to do and when to do it. Trust your fund manager and give them time to get you results.
4: Invest in great blue chip companies, avoid fees as much as you can, and hang on to those companies for as long as possible. Warren Buffet
What he means: Invest in the companies you believe in, particularly the ones that make money out of you. Which companies do you give most of your money to? Which companies do you admire the most? Buy shares in them and hang on to them for as long as you can.
5: “Stick to the plan, stay invested, allow the power of compounding to work for you.” Mary Callahan Erdoes
What she means: Staying power is everything. Let the return on your return get you spectacular growth in the long term. Stay invested through thick or thin and only withdraw your money when absolutely necessary; for example, when a better investment comes along.
6: “The best time to invest is when there is blood on the streets.” Marc Faber
What this means: This is called contrarian investing; i.e. investing in something when others are getting out of it. Think of property and the bargains that were available during the high interest rate periods of the early 90s. Don’t you wish you’d bought then, when the average house price was £52,500 in London? Those who bought back then are laughing right now. The same principle applies to almost every type of asset class.
7: “When everyone else thinks the world is going to end, BUY. When everyone else thinks these are the greatest markets in history, SELL.” Sir John Templeton
What this means: Buy low and sell high. This may seem simple, but it isn’t. Again, choose good fund managers and let them make those decisions for you whilst you get on with the important job of living your life!