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6 Investment tips to start the New Year [Part One]

It is the time of year to reflect on what has happened and look forward to what is coming up. For all the political unrest that we have had to endure, 2016 has been a good year for equity investors. The UK’s leading equity index fell by 4.1% during 2015, but at the time of writing it had risen by 10.9% during 2016 [to which you can add the dividends paid out to investors]. So, for all the talk of problems in China, the oil sector, Brexit, Trump v Clinton and more recently the Italian referendum, 2016 has been remarkably kind to equity investors.

Twelve months on we are once again talking about interest rate increases. The US Treasury has increased their base rate by 0.25% causing Sterling to fall in value. The Euro has also come under pressure from this rate rise and the renewed uncertainty caused by the Italian banks.

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If you have been following my articles for the last year, you might begin to think that I am a doom and gloom merchant which is most certainly not the case. You should remember that the role of a private client wealth manager is to guide investors of all ages and portfolio sizes whilst maintaining their lifestyles and ensuring that as much as possible is passed efficiently to the next generation. Stock markets on average rise three years out of four. We have found that if we keep an eye on the problems ahead; that the good times will look after themselves. Which is why I thought it would be a good time to share the first 6 of our 12 investment tips for Christmas with the remainder to follow next time.
1. Understanding risks – There is more cash held on deposit at the banks today than before the 2008 credit crunch. Many savers keep their savings in cash, not because they are worried that the sky will fall in, but because they don’t understand investments. Helping savers understand the risks will help reduce the barriers that stop them from making their first steps into investing.
2. Inflation – Is very stealthy during your working life, but removes its invisibility cloak at retirement. Once you stop work most peoples’ incomes do not keep pace with the rising costs of living. With many people living to well into the 80s these days, this is leading to poverty in the later part of retirement. Protect yourself from inflation!
3. Having goals – Set a goal or objectives, before and after retirement. Your goal needs to be realistic for the amount of capital you have and the risk that you are willing and, more importantly, able to take. If you don’t need to take a risk, why take it? If you are not willing to take some risk and you are behind schedule, you may need to accept that you may not reach your objectives. Set realistic goals.
4. Emotion – Investing is easy during the good times, but emotions cause some investors to bail out at low points in the market cycle. Many never regain the confidence to re-enter the markets. When it is your own money on the line; emotions can get the better of you during difficult times. Most investors would benefit from being able to discuss their investments with an experienced investment professional. Seek help when you need it.
5. Long term investments – Investments fluctuate, some more than others. Regardless of your risk profile, you are more likely to gain better results by investing for the longer term. Unless you know you are terminally ill don’t prevaricate by saying I don’t know how long I have left. More often than not, not making a decision is worse than making a bad decision. Investments can be transferred to the next generation, don’t let your age be a barrier to gaining better returns.
6. Ownership investments – Most of us own or seek to own a property, some own their own business, so why do some people say ‘I don’t want shares’? Houses and private businesses rise and fall in value, you just don’t see it because there is no ticker tape or media source reporting on it minute by minute. Stocks and shares, property, commodities and antiques are all ownership investments and have the potential to beat inflation over the longer term. Stocks and shares have outperformed most assets classes this year and have the potential to provide a rising income overtime.
  A prosperous New Year from all of us at Raymond James Invest Together
  Contact us with questions you may have about this or your savings to see how we can assist.
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