Six top-tips for a successful investment plan

February 28, 2015 / Knowledge Centre

1) Have a clear understanding of what you wish the investment plan to achieve and communicate this clearly to your adviser. Make notes during the initial discussions or keep a copy of the notes that your financial adviser makes. This will allow you to review your targets in the future and adjust the investment plan if needed.

2) Read the investment product brochure and other key documents attentively. It is important that you inform yourself about the terms and conditions and ask questions if something is not clear to you before you start the investment plan. Do not hesitate to ask questions or ask for clarification. Your adviser should be able to explain every detail of the plan he offers to you.

3) Investment involves risk and your plan will go up as well as down. You cannot expect a straight line investment performance like a bank account, but with high attractive returns and no risk. There are no guarantees on investment performance and nobody can/will give them. Set reasonable investment return expectations that take into account the current state of the market and the current interest rates. Significantly higher return expectations or promises inherently involve more risk.

4) Only invest for the medium to long term. Short investment horizons are not suitable for many investment products for two reasons; first of all the investment performance can fluctuate strongly on the short term and secondly the costs to exit most investment products in the early years are relatively high.

5) In connection to point 4 and point 3 do not check the performance of your portfolio on a daily basis. There is a lot of evidence that portfolios that are actively managed underperform compared to a more passively managed investment portfolio. Time cancels the effect of short term volatility and filters out the short term investment noise. All that is left are long term trends. As a long term investor that is what you should be focused on. With hindsight all investment crisis from the past look small compared to where we currently are in the market. Don’t let the short term volatility impact your long term investment decisions.  

6) When you start a regular saving plan set a contribution that you can contribute throughout the majority of the term of the plan. Regular saving plans are great tools to accumulate wealth, but only work when you can contribute on a regular basis throughout the term of the plan, apart from short intervals when flexibility is needed for force-major situations, and at the original premium level.