Vanguard’s principles for investing success
Your roadmap to successful investing is based on four simple principles.
Stay well balanced
Let’s face it, there’s no guarantee any investment doing well this year will do well next year.
In fact, the best-performing asset type one year can sometimes be the worst-performer in the following. Successful investing benefits from having a good balance.
Rather than trying to pick the winning investment each year, spreading your investments across a wide variety of assets will help reduce the risk of loss. Investors who are well diversified tend to enjoy a smoother investment ride over the long term.
Minimise your costs
It’s quite simple really. While you can’t control what happens on markets, there’s one very important thing that you can control. That’s the amount you pay in fees to invest.
In fact, when you’re investing, you get what you don’t pay for. Every dollar that you don’t have to pay in fees and costs is a dollar more in your pocket. In other words, the lower your costs the greater your share of an investment’s return.
A few percentage points here or there may not seem much. But over time, thanks to the magic of compounding, this can really add up. Fast forward a few years and you can find it translates into thousands of dollars less in your final investment.
Maintain your perspective
Fear. Greed. Panic. People don’t always behave rationally, especially when it comes to money. When markets go down it’s tempting to run for the safety of lower-risk investments, but then you can easily end up missing out on the rebound.
And when markets go up, it’s tempting to start chasing returns and moving more money into well-performing investments.
Making short-term decisions on the basis of daily market ups and downs can make it harder to reach your long-term goals.
Despite bumps along the way, investors with the patience and discipline to stay the course are well rewarded over the long term.