The 10 golden rules of successful investing

Investing is not just a numbers game; it's also a journey through a rollercoaster of emotions, regardless of your gender. Emotions are an intrinsic aspect of human behaviour; however, there is a common misconception that women are more likely to be overly emotional investors and, therefore, less successful in their investment decisions. On the contrary, numerous studies have consistently highlighted the strengths of women in the world of finance. In fact, women exhibit sound and pragmatic investing behaviours that are often underrated. Research tells us that women tend to prioritise long-term, goal-oriented investing strategies and display exceptional discipline, making great investors. Additionally, women frequently opt for well-diversified investment portfolios, a key factor in risk management.

At the outset, investors often experience optimism and hope as they embark on their investment journey. When markets perform well, euphoria sets in, and the thrill of seeing portfolios grow can be intoxicating. As inevitable market fluctuations occur, panic can quickly follow, particularly during sharp downturns, causing fear and impulsive decision-making. However, over time, a sense of relief can emerge when markets stabilise and recover, offering a glimmer of optimism once more. Through this emotional journey, successful investors learn to manage these feelings, make rational decisions, and stick to their long-term strategies, ultimately achieving their financial goals.

Whether you're a beginner looking to get started or a seasoned investor aiming to fine-tune your strategy, let's explore the 10 golden rules of successful investing:

1. Know your why:

Understanding your investment goals is paramount. Your "why" guides your investment choices. Before you start investing, take the time to set specific and realistic financial goals, considering your investment time frame, initial and ongoing contributions, and risk tolerance.

2. Recognise the cycle:

Financial markets go through ups and downs, and comprehending these cycles is vital. Historical data reveals that markets tend to recover and reach new highs over extended periods. Remember that downturns are temporary. The adage "If in doubt, zoom out" emphasises the importance of taking a broader perspective. It helps investors recognise that what may seem like a significant market dip now often becomes a minor blip when viewed within a more extended market history.

3. This time is rarely different:

During significant market movements, there is a tendency to believe that "this time is different." History has shown that such beliefs are often misplaced. While each market cycle may have unique characteristics, the fundamentals of investing remain constant. Don't let emotions cloud your judgment; stick to your investment strategy.

4. Be wary of the hype:

Hearing about the "next big thing" from a neighbour at a barbecue is often a red flag. Investing should not involve following the crowd, as it's usually the worst time to invest when everyone else is rushing in. Contrarian investors, like Warren Buffet, seek valuable opportunities when others are panicking. Nevertheless, even as a contrarian, conducting thorough research and applying fundamental quality tests before making investment decisions is essential.

5. Don't be swayed by high returns:

Chasing last year's high-performing investments can be a costly mistake. Successful investors look for opportunities in the current market rather than trying to replicate recent successes. It's important to conduct due diligence and focus on long-term prospects rather than short-term gains. As the saying goes, "past performance isn't an indication of future performance," and the shorter the timeframe you're reviewing, the truer this is. To assess past performance, ensure you have a long-term perspective of 10 plus years, allowing you to consider the impact of different market cycles.

6. Diversify:

Diversification stands as one of the fundamental principles of investing. It involves spreading your investments across various asset classes, including stocks, bonds, real estate, and cash. Further diversifying within each asset class can reduce risk even more. Diversification serves to mitigate the impact of poor performance in any one investment, increasing your chances of building a balanced and resilient portfolio.

7. Buy and hold:

Short-term speculation carries risk, and few investors consistently profit from it. Instead, prioritise purchasing quality investments and holding onto them for the long term. Patience is key when investing, and retaining investments until they have time to achieve their expected returns can lead to more favourable outcomes.

8. Invest regularly:

Implementing a disciplined regular investment plan, often referred to as "Dollar Cost Averaging," is a strategy aimed at countering analysis paralysis, the tendency to overthink and become inactive. This method entails investing a fixed amount of money at regular intervals, irrespective of market conditions. By adopting this approach, you can alleviate the stress associated with timing the market, reduce the impact of market volatility, and progressively build a substantial portfolio over time.

9. Consider tax implications:

Understanding the tax implications of your investments is essential. Depending on your financial goals and taxable income, there are various ways to structure your investments to minimise tax liabilities and maximise returns. A tax professional can help you explore different options based on goals while considering your initial investment amount, regular contributions, and your investment timeframe.

10. Have regular check-ins:

Regular reviews of your investments and your investment strategy is essential. While this doesn't mean daily checks on your investment returns – remember, investing is for the long-term– it does involve periodic assessments. At least once a year, you should review your financial goals, assess your investments asset allocation, review your risk tolerance, and evaluate the performance of your portfolio. If you need support with your investing journey, work with a professional financial adviser who can offer valuable guidance and keep you on track to achieve your objectives.

These 10 golden rules of investing serve as a roadmap for building a successful and resilient investment portfolio. By adhering to these principles and adapting them to your unique financial situation, you can navigate the ups and downs of the market with confidence and increase your chances of achieving your long-term financial goals. Remember that investing is a long-term journey, and smart money moves today can lead to financial security in the future.