Our four tenets of better investing
First up in our series on making investing easier – making sure you’re doing the right things
By Daniel Lane, Fidelity Personal Investing
Quite often we find ourselves examining the finest of details and can lose sight of the bigger picture. With real-time online stock tickers and 24hr business news blaring, the tendency to view our investments with the same frenetic eye has never been greater.
We’re all human and will have tendencies to think or invest in ways that might not benefit us from time to time, so having a set of personal rules to stick to can help steady the ship.
Regardless of technological innovation and a constantly evolving marketplace, the foundations of better investing remain the same. Our key investment ideas lay the groundwork for long-term investing and while our personal situations and preferences will lead us down different paths, our four tenets are here to keep us all on the right track:
1. Get investment ready
Good investing starts before we invest. However, this is a step we don’t always pay enough attention to. At Fidelity, we believe investment is for the long-term so it makes sense to start with a firm financial foundation; building a solid attitude to investing and developing a clear mind-set only work when there’s nothing else affecting your decisions.
Whether it’s paying off debt or making sure you have a financial safety net in place, making sure you set yourself up before you even begin is essential. Aim to build up six months’ salary as an emergency fund and make sure you are happy you know how to begin your investment journey.
Our tools to learn and develop your understanding of investment are here but if it makes you more comfortable, you can always seek advice elsewhere.
2. Get started the right way
Whatever stage of life you are at or depth of experience you have behind you, we know the best long-term investment decisions are based on your own personal financial goals. Making sure you know what you want from your investments and how you’re planning to get there help set the course for the rest of the journey; ask yourself what you’re investing for and how long you have before you need it.
As investors ourselves, we understand the benefits of investing regularly, keeping costs low and starting early, and we also know that good investing is simple investing. Getting started the right way means ensuring you’re clear on your goals and the steps to make sure it stays clear.
3. Manage risk, seek opportunity
The balance between risk and reward lies at the heart of investing and getting it right means you can be more comfortable in your investment decisions. We believe matching your goals to your tolerance for risk should form the bedrock of your investments, not getting caught up in short-term fads or basing decisions on past performance.
Sticking to the fundamentals helps avoid the temptation of making investment decisions that aren’t right for you.
4. Plan for the long term
The biggest advantage you can give your investments is time. Investing for the long-term means ignoring daily stock market gyrations and reminding ourselves of the value of compounding, which only increases throughout your investment journey.
The more you check, chop and change, the higher the likelihood is of giving up those long-term benefits and while we know that rebalancing our assets once a year is healthy, when you’re happy with your choices, the best thing to do is nothing. Fidelity’s Peter Lynch describes rebalancing too much as, “Pulling the flowers and watering the weeds,” so keep on top of things but understand that the principal determinant of your investment returns can be you.
The value of investments and the income from them can go down as well as up and investors may not get back the amount invested. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity Personal Investing does not give investment advice. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser. You need to be realistic about how tolerant to risk you are and to be aware of your capacity to withstand loss of capital, should markets go down.