1. Successful investors don't start without a plan, any more than they would start a road journey without at least a map and a destination in mind.
Your investment plan doesn't have to be fancy, but it should be based on where you are (your current financial situation), the risks you are prepared to take and your destination e.g. a comfortable retirement by a certain time in your life.
Your plan should call for specific action steps you will take. Successful investors expect to reach their goals over time, by identifying the right things to do, and then doing those things consistently. Saving money regularly is perhaps one of the most basic of these useful behaviours.
Financial advisers are experts in the development and creation of sound financial plans!
2. Successful investors don't rely on just one investment, or even a handful. They diversify widely, knowing it's impossible to reliably predict which investments will go up in value and which will decline.
Diversification doesn't remove risk altogether, but it spreads your risk around. Over the long run, this will make your ride less bumpy and more comfortable, making it easier to stick to your plan. In addition, greater diversification often leads to higher returns for a given level of risk.
Financial advisers will be able to guide you to the best possible solutions to meet your medium- and long-term needs.
3. Successful investors don't ignore how much they pay for investment services and products. They keep their costs low, knowing that is one of the few parts of the investment process they can control.
Over time, those "little" savings matter more than you might think. On a one-time investment of £10,000 that returns 8% p.a. over 20 years, cutting your annual expenses by 1% would boost your annual return to 9%. That would boost your ending value from £46,610 (8% p.a. for 20 years) to £56,044 (9% pa. for 20 years). That puts an extra £9,434 in your portfolio - nearly as much as your entire original investment!
Financial advisers conduct robust due diligence on a wide range of providers – and can often secure better terms than individual investors.
4. Successful investors don't let the ups and downs of the market throw them off course. They realise that downturns and even bear markets are normal - and that weathering these storms is necessary for long-term success.
They do their best to stay the course, avoiding panic buying when prices are going up and steering clear of panic selling when the stock market is falling. This isn't always easy emotionally, but it's vital to your long-term success.
Have a financial coach to hold your hand and help you stick to your goals through the ups and downs.
5. Successful investors don't expect miracles and don't base their plans on unrealistic expectations or hopes for good luck.
Investors may wish to build their plans on expected returns significantly lower than the historical averages. Here's what that means in general terms: If the long-term return trend of the stock market is 7% p.a., make your plans on the assumption that your own stock investments will earn 5% p.a. That will require you (or at least strongly encourage you) to save more. And that in turn will always serve you well.
If your returns exceed your expectations, you'll have no trouble adjusting. But if things go the other way, you could wind up short of what you need to retire.
Financial advisers have access to specialist tools that will help you see the impact of your saving and spending habits long into the future – vital for more accurate planning.
6. Successful investors don't ignore taxes.
Where possible use tax-advantaged vehicles such as ISAs and pensions depending on your situation.
Financial advisers can help you maximise your tax reliefs and allowances and importantly can help you avoid the “tax traps” that our complex system creates for the unwary.
7. Having avoided the other traps on this list, successful investors don't get caught up in the incessant commentary in the media. Commentators often seem to have two "lists" of explanations for whatever is happening and whatever developments seem to be just over the horizon.
The "good news" list is always filled with plausible arguments for why the market will go up and therefore why investors should buy. The "bad news" list is always filled with equally plausible arguments for why the market is overdue for a downward trend and therefore why investors should sell, or at least avoid buying.
Financial Advisers will help you cut through all this “noise”, build a long-term sustainable plan and ignore all the short-term noise thus, helping you sleep at night!
8. Successful investors don’t go it alone. Just like preparing for an endurance race you should consider a coach for your money. Helping with your plan, keeping you on track, guiding your decisions, being there when things get tough, making sure you gain from their experience – all these things, together with the fact that they are experts who have spent many hours passing exams and being approved by the regulator can and should make a huge difference to your outcome.
You only get one go at retirement planning - spending a little on an expert to guide you on the journey could be the best investment you ever make.
Fast start 2020 - TCF Investment roadshows
Supporting TCF Investment on their roadshows, the Embark Group will discuss pension allowances and the importance of planning.
View more details and book your place today.
David Norman, Joint Founder and CEO, TCF Investment
Before jointly founding TCF Investment a decade ago, David (DAN) Norman held senior roles with life companies, banks and asset managers and was latterly CEO of Credit Suisse Asset Management (UK).
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