Looking back on your investments can be frustrating. Why did you buy there, and sell just then?
“I backspegeln känns utfallet ofta betydligt mer förutsägbart än det egentligen var”, writes Handelsbanken’s placeringsstrateg Peter Engstedt in the bank’s latest Fokus Placeringar.
When it comes to managing investments, having a good plan and emotional discipline can help alleviate regrets, he explains, offering ten tips:
1. Realistic Expectations
Setting expectations too high for returns increases the risk of disappointment. Keep in mind that historically, the Stockholm stock exchange has yielded around 10% per year, although individual years may vary.
2. Risk-taking is Part of Saving
There is always a risk involved in stock market investments, so not every placement will go as desired. Accepting this risk can help ease the emotional burden.
3. Nobody is Perfect
Don’t strive for perfection. “You will rarely be able to buy at the bottom and sell at the top,” writes the investment strategist, recommending acceptance of imperfect timing in buying and selling.
4. Clear Plan Towards Savings Goal
Establish a savings goal and determine the level of risk that works for you. Make it as clear as possible: are you saving for a specific purchase, or more long-term for retirement?
5. Diversify Risks
Once a savings goal is set and you’ve identified your risk tolerance, it’s time to decide how to allocate your savings between stocks and fixed-income investments.
“Since fixed-income investments provide stable returns, it reduces the feeling of losses whether the market performs well or poorly,” writes Peter Engstedt.
It’s also crucial to diversify risks within stock investments.
6. Stick with the Plan
Avoid reacting to short-term market movements and consider reviewing your investments quarterly. Engstedt points to a trend where frequent trading often leads to lower returns.
It’s also important not to make decisions under stress. Take your time and carefully consider any purchases or sales.
7. Stop Overthinking
Don’t dwell on losses or past mistakes. Instead, look ahead and focus on improving future decisions.
8. Monthly Savings
Establishing a regular monthly investment plan in funds can reduce the stress of trying to time the market.
9. Overcome Fear of Losses
“For most of us, the fear of losses is a stronger emotion than the joy of a profit,” writes the investment strategist. Keeping all your money in a bank account or low-risk fixed-income funds may hinder your investments from growing enough to reach your long-term goals.
The same applies if you sell out of fear during significant market downturns, locking in losses that make it harder to achieve your objectives.
10. Seek Advice from an Advisor
Engstedt advises seeking assistance from an investment advisor at the bank to receive more guidance on your strategy. It is worth noting that he is employed by one of Sweden’s major banks.
By following these expert tips, you can navigate the complexities of investing with greater confidence and clarity, paving the way for a more successful financial future.