Top tips for choosing investments | David Gene Neugart

David Gene Neugart is a very reputed businessman. He is very passionate about his work and David Neugart always believes in himself. Buying stocks is not difficult. What is challenging is to choose companies that consistently outperform the stock market.

The best thing about investing strategies is that they’re flexible. If you choose one and it doesn’t suit your risk tolerance or schedule, you can certainly make changes. But be forewarned: doing so can be expensive. Every purchase carries a fee. More importantly, selling assets can create a realized capital gain. These gains are taxable and therefore, expensive.

1. Consider how long you can invest

Think about how soon you need to get your money back.

Time frames vary for different goals and will affect the type of risks you can take on. For example:

• If you’re saving for a house deposit and hoping to buy in a couple of years, investments such as shares or funds will not be suitable because their value goes up or down. Stick to cash savings accounts like Cash ISAs.

• If you’re saving for your pension in 25 years’ time, you can ignore short-term falls in the value of your investments and focus on the long term. Over the long term, investments other than cash savings accounts tend to give you a better chance of beating inflation and reaching your pension goal.

2. Make an investment plan

Once you’re clear on your needs and goals – and have assessed how much risk you can take – draw up an investment plan. This will help you identify the types of products that could be suitable for you.

A good rule of thumb is to start with low-risk investments such as Cash ISAs.

Then, add medium-risk investments like unit trusts if you’re happy to accept higher volatility.

Only consider higher risk investments once you’ve built up low and medium-risk investments.

Even then, only do so if you are willing to accept the risk of losing the money you put into them.

3. Diversify

It’s a basic rule of investing that to improve your chance of a better return you have to accept more risk.

But you can manage and improve the balance between risk and return by spreading your money across different investment types and sectors whose prices don’t necessarily move in the same direction – this is called diversifying.

It can help you smooth out the returns while still achieving growth, and reduce the overall risk in your portfolio.

4. Decide how hands-on to be

Investing can take up as much or as little of your time as you’d like:

• If you want to be hands-on and enjoy making investment decisions, you might want to consider buying individual shares – but make sure you understand the risks.

• If you don’t have the time or inclination to be hands-on – or if you only have a small amount of money to invest – then a popular choice is investment funds, such as unit trusts and Open-Ended Investment Companies (OEICs). With these, your money is pooled with that of lots of other investors and used to buy a wide spread of investments.
• If you’re unsure about the types of investment you need, or which investment funds to choose, get financial advice.