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  • Writer's pictureOakmont Financial Group

Fundamentals of Intelligent Investing

Updated: Apr 12, 2019

View of an investor's desk with a laptop and stationery

There is no lack of information available on the internet - from tips and tricks on investing, to in-depth books on financial planning. But where do you begin? Who do you trust?

We asked ourselves these very questions.

Honestly, it can be hard to understand and navigate the jargon: investment, risk, negative gearing, asset, equity, liability… This is especially true if you don’t have some basic education in finance or economics. Things can get overwhelming and make you contemplate, “Why bother?”

But if you take the first steps in learning about the world of investing, you can begin to uncover secrets that will help you succeed. You will learn to make well-informed and deeply analysed decisions and to follow the best advice and guidance so that your money works to your advantage.

Here in this week’s (and our first) blog post, we discuss the fundamentals of intelligent investing. We give you 7 precepts to take away that are simple to follow and easy to absorb. And, we recommend that you give each of these your utmost thought and attention.

1. Set Clear Goals

Setting clear goals is the first step to investing intelligently. What is your investment target and what is it for? What is the amount that you initially have available for investment and how much can you add regularly? What level of return would you consider suitable and what level of risk are you willing to take? How long is your investment time frame?

Draw a clear sketch in as much detail as possible. Use the tried and tested S.M.A.R.T. method for goal setting: Your goals should be Specific, Measurable, Attainable, Relevant, and Timebound.

2. Get an Early Start

Once you have your target set, get started. You know your goal in the most definite terms from Step 1, now calculate how much you have to put aside periodically – weekly or monthly – to meet that target. Of course, it is best to get an early start, but it’s better late than never!

If, for example, you want to save $30,000 for a 2-week long vacation in Europe with your partner, you will have to put aside $5,000 per month for six months to meet this target. There are numerous options available for investing this amount so you can earn some additional dollars in interest.

3. Take Professional Guidance

Talk to a professional for investment advice. A professional can guide you on your journey, inform you, and help you make sound decisions. The expert may reveal any gaps in your outlook, advise you about any flaws in your strategy, or warn you if there are any pitfalls in your way.

Make sure the advice is unbiased and trusted, coming from a qualified financial professional. Professional advice may make investing easy and relatively risk-secure for you.

4. Diversify Your Portfolio

Follow the idiom and never put all your eggs in the same basket! Diversify and spread out. When your money is invested in different investments and asset classes, it can reduce the risk.

Investments generally and invariably fluctuate to different extents and at different times. By diversifying your investment, you are increasing your chances of earning better long-term returns. Diversification also helps you to concentrate on the overall performance of your portfolio rather than the individual components.

5. Understand Risk and Return

In truth, no one can predict the future. It is uncertain and unpredictable. But there is a relationship between risk and return that can, to a large extent, determine the performance of your investment.

There is no such thing as a low-risk high-return investment. Risk is the primary driver for a return on any investment. So, make sure you’ve analysed the risk closely before investing. And, don’t hesitate to take professional advice at any point.

6. Think and Rebalance

Rebalancing is an important step. Rebalancing will help you keep the asset allocation in line with your target. It also helps in reducing and stabilising risk. Talk to a professional about rebalancing your portfolio.

7. It Takes Discipline

There are four things you can control when you make your investment: cost, risk level, asset allocation, and diversification. Everything else is market noise. Learn to focus your energy on things you can control and make discipline your strong suit. Again, it is highly recommended that you consult with a professional before making any final decisions. Whether you have $40,000 or $4,000,000 – the above tips will aid you in steering the odds in your favour and help you achieve investment success!

If you are looking for investment advice, we are here to help. Talk to us today. We would be delighted to hear from you.


General Advice Disclaimer

The information contained on this website and in this blog-post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly, and where appropriate, seek professional advice from a financial adviser.

Although, every effort has been made to verify the accuracy and correctness of information, Oakmont Financial Group, together with our consultants, officers, agents, and employees, disclaim all liability for any loss or damage suffered by any persons directly or indirectly relying on this information.

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