Invest successfully. With these basics.
Investing money is neither an art form nor wizardry: It's a skill that can be learned. However, there are a few rules for making it profitable. Read our top tips for investing successfully.
Preparation is the key to investing
Investing on the markets haphazardly and without a plan can be disastrous and deplete a lot of capital in a short time. This is why full preparations and analysis are a must before you decide how to invest. It allows you to devise an investment strategy that is tailored precisely to your needs and goals. A structured and disciplined approach will help you make your investments succeed.
1. What is the right investment strategy specifically for you?
The process begins even before you invest a single cent. To invest your money smartly, you must know exactly what you need and what your goals are. Then you must consider your current financial situation and personal risk profile. How much capital can you invest? How much risk can you take – and how much are you willing to take?
Your personal knowledge and experience with the financial markets also play an important part in your investment decisions. Investing in complex products without understanding them, merely following trends, or overestimating yourself in an attempt to get higher returns may result in a rapid loss on the market.
Your investment strategy must reconcile your expected returns with your risk tolerance and capacity. Studies show that over the long term, 82% of performance depends on the chosen investment strategy. So it's worth keeping calm even in volatile markets and standing by your personal strategy.
Read how to avoid the most common investment mistakes.
2. What is your ideal time horizon?
The time horizon depends entirely on the investment strategy. The basic rule of thumb is: The riskier the investment profile, the longer the time horizon should be. However, the expected returns are higher as well. If you invest your money for a longer time period, then short-term price fluctuations will be less critical. For this reason, private investors with a short time horizon of a few years should have a higher percentage of bonds in their portfolio, and keep equities low. However, those who can keep their money invested for more than eight years should aim for a higher equity portion. Before proceeding, find out the right time period for an investment and whether it meets your needs.
Learn more about how to invest successfully for the long term.
3. How high is the risk?
There is no such thing as a risk-free investment. But the belief that keeping your money in a savings account or under your mattress is safer than the financial markets is unfortunately a very common myth. You must take a very close look at the risk of your investments. While high returns are tempting, they usually involve more risk. Make sure you know the risk of any investment you're considering.
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4. Does the risk match my investment strategy?
Once you know the risk of an investment, compare it with your strategy. If the risk is too high, it's best to keep looking. Also keep your portfolio mix in mind. If it contains many low-risk investments, you can be somewhat more adventurous. A long-term comparison shows that the risk-adjusted returns on a diversified portfolio are always better than one with just a single asset class. Note: You should keep your initial investment strategy in place even if the markets are tumultuous. Knee-jerk responses can increase your risk or result in unnecessary losses. After all, price losses are often followed by a longer recovery phase. If your time horizon is far enough in the future, waiting generally pays off.
How the right strategy and investment discipline can help you invest successfully even in uncertain markets.
5. When is the right time to invest?
Waiting is generally a bad idea when it comes to investing. First of all, it's impossible to predict short-term fluctuations with accuracy, and second, investors can participate in economic growth by remaining active on the markets for the long term. If you wait for the perfect time to get started, you risk missing out on attractive investment opportunities.
The answer to the question "When should I invest?" is unequivocally "Now," because waiting as an investment strategy does not pay off over the long term. In other words, the longer your time horizon is, the less relevance your initial investment date has for the average performance of an investment strategy. Learn more in this article.
6. Is the portfolio well diversified?
You must have sufficient diversification to balance out portfolio risks. So check to see if you already have similar investments. You should have a mix of asset classes and other criteria, such as countries and industries, at all times.
A regular analysis of the entire securities safekeeping account is important too, because over time even a perfectly diversified portfolio can get off balance due to the varying performance of some securities. If the weighting of your holdings no longer matches your investment strategy, strategic acquisitions and divestments will help get your diversification back in shape.
7. What are the pros and cons of the investment?
All investments have their upsides and downsides, such as regarding risk, product complexity, or volatility. To find the best product for your personal investment strategy, you should take a detailed look at the characteristics of your potential investments. The services from Credit Suisse including professional advice and individual mandate solutions will help you identify and mitigate any negative factors in advance. However, if there are too many downsides, you should avoid the investment entirely.
Before investing, it's well worth taking a step back. Do you still have questions on the product? If so, you should schedule a consultation. The investment experts at Credit Suisse will be pleased to assist you in a personal meeting. Our professionals will help you each step of the way and can offer you alternative investment options that fit your needs perfectly. After that, successful investing can begin!