You’re about to embark on a new journey, which often comes with the initial wave of excitement. But it’s important to keep two feet planted firmly on the shore. Follow these 5 disciplines to help you stay on track, and make sure your investment is working for you.
1. Be SMART.
Are you building up your pension? Are you thinking of buying a second home? Or are you just aiming for a certain percentage of return on your investment? Using the SMART rule is the bar that you can measure your success by, which means you’ll stay in the game and push for your cause. Make sure that your investment goal is SMART – Specific, Measurable, Attainable, Relevant and Time-bound.
2. How far does your investment roadmap go?
You may be in it for the long game, particularly if you’re an early career investor. But if you’re coming to investment later in life, you need to be realistic about how many investment ups and downs you can handle before you get to the part where you can relax and make significant returns. Thinking about your investment journey means thinking about the level of risk you’re willing to take, and for how long. This might also inform how many companies you choose to take into your portfolio.
3. Spread the risk.
If you put all your eggs in one basket you’re not doing yourself any favours. Spreading your portfolio across various markets means that you avoid any sudden market crashes, or even acts of god such as weather conditions! Likewise, if you only have one business in your portfolio, you lose everything. The smartest move is to build up a healthy spectrum of portfolio of investments that maintain and support each other in a healthy and balanced way.
4. Apply the KISS approach to investment.
“Keep it simple, sir/madame” is the phrase that should be every investor’s mantra. If you can’t easily explain what you’re investing in, then there’s something fundamentally wrong with your relationship with the companies you’re investing in. Either that, or you need to do more homework. Don’t let fancy language pull the wool over your eyes.
5. Be strict with your targets.
If you know where you’re going with your SMART goals, you’ve got your strategy road map in place, and you’ve chosen your portfolio of small business investments to match, it’s time to take the journey. This journey doesn’t mean bailing out at the first bump. Likewise, as soon as you hit your first whiff of success, be prepared to stick with it. But if an investment has come in at the level of return you wanted, go ahead and sell. And if it’s not doing well, or meeting targets, let it go.