This is part of Morningstar’s ‘Perspectives’ series, which features contributions from third parties such as asset manager, academics and investment professionals. In this article, Darius McDermott, managing director of Chelsea Financial Services, provides ten top tips for managing your own investments.
1. Know your personal risk tolerance – what percentage of your money are you prepared to suffer paper-based losses in the short-term? Can you stomach seeing your investment go up and down?
2. Decide on your short-term and long-term financial goals – what do you need the money for, how much do you need and when do you need it?
3. Work out how much you can afford to invest on a monthly or annual basis.
4. Research the different asset classes of investments (equities, bonds, property, cash and commodities are usually enough for most people) and understand the pros and cons of each.
5. Decide which combination of asset class will best help you achieve your goals.
6. Research the different ways of investing in these asset classes: funds, ETFs, shares, investment trusts, etc. And decide which one(s) you want to invest in.
7. Shop around to see where you can get the best deal for that investment and make sure you are not paying over the odds.
8. Make sure you are using your tax allowances: ISAs are a good starting place for your investments.
9. Regularly monitor and review your portfolio to make sure it is still on track to achieve your goals and adjust when necessary.
10. Ignore short-term noise and resist the urge to change your investment too often – you'll probably incur extra charges and we often make mistakes like crystallising losses because we panic, or buying a fashionable product just as it has reached its peak.
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