**Source: Wealth Management | Wealth Management Services | Barclays
**
1. Don’t let your heart rule your head
There is no need to become emotionally attached to investments, in fact it’s best avoided wherever possible. As we’ve seen in Why you are your own worst enemy, we are often the ones who stand in the way of our own investment success. Regular cold, critical assessment of the situation is what is needed. Be brutal if you have to.
2. Don’t jump on the investment bandwagon
They say that by the time you’ve seen a bandwagon go past it’s already too late to jump on board. Following the crowd is a mistake that many investors make. Admittedly, buying an investment just because it is going up is a technique that momentum investors use. However, doing so without having an idea of value is foolhardy.
Similarly, bargain hunting among shares or funds that have fallen heavily might seem tempting, but often bad news is followed by more bad news. Don’t buy it unless you truly want to own it for the long term.
3. Don’t sell just because an investment has made or lost a lot of money
Running scared can be a costly business. And selling too early is a mistake that many investors make. Often it is done for the right reasons, for instance when a successful position has become too large. However, “running your winners” is a strategy that has benefited many of the world’s most successful investors; think Warren Buffett.
A big faller though is a different matter. Usually, a large fall means something has gone wrong or something has changed making the investment less appealing or more risky. This requires a cold assessment of the facts.
4. Don’t double up on risk
A common mistake is having too much of your portfolio exposed to one thing. For instance, investing in mining funds and Chinese equities may bizarrely offer little diversification. As the mining sector is dependent on Chinese growth it may mean the two rise and fall virtually in tandem. Similarly, steer clear of owning funds which have big stakes in shares you already hold.
5. Don’t go for the highest yielding investments
Investors are naturally attracted to investments producing a high level of income. However, it is also a warning sign. There is likely to be a very good reason why an investment yields so much. Is it a share where the dividend is likely to be cut? For bonds, higher yield means higher risk - there is more chance of default.
6. Don’t keep all your eggs in one basket
Diversification is the cornerstone of good portfolio management. Having all your eggs in one basket might make you a fortune - but equally it might lose you one.
7. Don’t hold too many investments
While diversifying is sensible, there is no point having an entire portfolio of funds or shares in the same sector doing much the same thing, however much you believe in it. Strike a balance between backing your best ideas and diversifying sensibly.
8. Make sure you have enough time to monitor your investments properly
Once you’ve set up your portfolio, the work doesn’t stop there. You need to regularly review your investments. Individual shares require closer attention than funds, but even these should be checked at least every six months.
9. Don’t be too short term
When investing keep a three to five year time horizon in mind as an absolute minimum. Don’t feel you have to react to every lump and bump in the market and similarly don’t feel you have to buy everything at once. Drip-feeding money into the markets or buying on the dips can be a good strategy for success.
10. Remember to take profits
Last, but not least, remember to reward yourself. There is nothing wrong with banking a profit, especially if an investment exceeds your expectations. You can use profits to diversify your portfolio or rebalance it.
