InvestNow’s 10 investing principles
Investing can feel complicated. These 10 principles help you focus on what matters, understand the choices involved and make your own decisions with greater confidence.
1. Invest Now
The best time to start investing is right away; compound returns pile up over time so the sooner the better. But the investment universe is a vast and complex space that requires knowledge, patience and risk management. Starting small, making regular contributions into diversified funds is a great place to start. Investing is not the same as trading or trying to time the market.
2. Understand the risks
From cash to shares to bonds and beyond, investors face a bewilderment of choice. Learn before leaping. Understand the fundamental behaviour of different assets, why asset allocation and diversification matter, and the relationship between risk and return over time. Research how professional investment managers run diversified portfolios; read disclosure documents; avoid unregulated products.
3. Asset allocation is (almost) everything
How you divide your money across different types of assets can matter more than the individual investments you choose.
4. Diversification is essential
Spreading your money across many investments and asset types helps smooth returns over time and protects you from any single investment failing.
5. Individual risk tolerance matters
Higher-risk investments can lead to higher returns over time, but not everyone is comfortable with the ups and downs. Understand your own tolerance for volatility.
6. Have a plan
Your goals, age, time horizon and risk tolerance should shape how you invest. Stick with your plan through volatile periods, and adjust it as your life changes.
7. Stay informed, but don’t react to the noise
Keep up with markets and your portfolio, but avoid reacting to dramatic headlines. Volatility is normal, so focus on fundamentals and stand by your plan.
8. Investment styles can be complementary
Passive, active and responsible investing each take a different approach. All are valid, and they can work together in the same portfolio.
9. Fees and tax are important (but not everything)
Future returns are never certain, but costs are. Understand the fees, tax and other charges of any fund or platform you use.
10. Investing is not a game
Investing can be rewarding, but it is no trivial pursuit. Choose well-regulated, licensed products and be aware of your own behavioural biases.
Keep learning at your pace
Good investment decisions start with understanding. Explore the Learning Hub for practical information about risk, diversification, asset allocation, fund selection, KiwiSaver and more.