|
The Seven Deadly Sins of Saving & Investing
(30/5/2006)
Whether it’s a financial spring clean or an annual review with a financial adviser, it is always a good time for investors to take-stock, not only of their existing portfolio, but their approach to investing for the future. Fidelity International has set out seven common errors to avoid when investing for the future.
Doug Naismith, Managing Director, European Investments, said: “These are very common errors that can be easily avoided, but are so often overlooked.
“Just taking a little time to really think about your approach to saving and investing, along with regular reviews of existing assets and investment goals can have a major impact on the future returns of your portfolio.”
Trying to time the markets
Waiting for the perfect moment to invest may sound like a food idea, but it is impossible to be sure how the markets are going to move. If an investor has decided a particular fund is right for them, they should go ahead and invest.
Fidelity’s research shows that missing out on these good days can have a significant effect.
Someone who invested £3,000 in a fund tracking the FTSE UK All-Share Index for the ten years to end 2005 would have seen the value of the investment rise to £6,418.01, but missing just the ten best days in this over this period would have reduced the final total to £4262.50.
Being distracted by recent performance
Past performance is not a guide to future returns, a warning all investors are familiar with. Performance figures should be treated carefully – good returns over six months could be down to good luck, while lacklustre results may just be a bad patch.
Investors should look back over several years, perhaps as far as the current manager has been in the job.
Investing with no plan
Many people start investing when they realise how important it is to save for the future, but they don’t necessarily take the time to think about the best way to achieve their goals.
The secret of successful investing is devising a plan and sticking to it over the years. Fidelity’s online Portfolio Planner can give investors an idea of how much they need to invest and help them choose suitable investments.
Focusing only on charges
While charges do make a difference to the returns of the fund, the fund with the lowest charges is not necessarily the right choice; charges are only one of the things to consider.
It can also help to see how a fund manager chooses investments and what sort of service the company provides. Paying a little extra may bring extra benefits.
Duplicating investments
Diversification is key to investing – a range of sectors and regions enables risk to be spread. But a variety of different funds does not mean that diversification has been achieved – funds may invest in similar companies or have a disproportionate focus on one area.
Fidelity’s online Portfolio X-ray tool looks into how an investor’s money is spread across geographic regions, industry sectors and types of investment, highlighting key overlaps and how an investor’s money is shared between companies in the various size brackets.
Failing to review
Making an investment is just the first step towards securing the financial future, it is just as important to review holdings as often as possible.
Trusting the future to cash
While deposit accounts are very secure, this security comes at a price. Returns on cash are much lower that what could potentially be achieved from a fund that invests in shares.
Part of the problem is inflation, which eats into the value of any long-term investment. Relying on a deposit account could mean ending up with less money than is needed.
If you are looking to start a offshore savings plan or invest tax-efficiently, just click the
'contact me' button below and provide us with a summary of what you are looking to
achieve along with your preferred contacted details. We will then arrange for a specialist consultant to answer your queries and recommend a suitable product.
|
