1. Always ask for financial advice
Probably the most important thing to do is speak to your financial adviser before making any financially committed decisions. Even when your investments are all set up and working, it’s still worth reviewing them with your financial adviser – at least once a year.
2. Know your attitude to risk properly
Different investing methods carry different levels of risk. Generally, the greater the risk, the greater the potential returns and the greater the risk of losing some or all of your money.
3. Diversify your risk
Investments with the greatest risk present the potential for the greatest losses. Generally it follows that the safest investments offer a smaller gain. So, if you’re comfortable with taking some form of risk with investing, it could
make sense to balance the amount of risk across your different investments. Your financial adviser will be able to help you with this. In nutshell, spreading your risk will lower your blood pressure leading to a higher life expentancy.
4. Spread your investment
Splitting your money into several different ‘pots’ might be a good idea. So you might keep one fund for a rainy day that you can dip into if you need to, and another for long-term investments. This should also help you to spread the risk.
5. Don’t ignore inflationary effect
Before investing, always bear in mind that inflation will make a difference to the real value of your money over time. By doing nothing, or if the return on your investment is lower than inflation in Sri Lanka, the buying power of your money could go down periodically.
6. Try to be realistic
You shouldn’t expect fantastic results overnight. Investing requires patience, and consideration of how your money will perform in the long term. You need to remember that the value of an investment can fall as well as rise based on several factors.
7. Protect yourself (and your investment) should the worst happen
Nobody wants to think about it, but if you’re going to invest, you must think about what would happen to your money if you died or became seriously ill. Would your investment have to be used for something other than what you intended it for? Your financial adviser will be able to talk through the options with you.
8. Think of what you’re investing for
Don’t lose sight of what your investment is for, and how much it will cost. Most of us tend to ignore the cost factor as soon as they see the potential higher return. Remember to incorporate a value for the risk as well.
9. Use the right products for you
Each investment product offers varying degree of risk and return according to how it’s structured and its tax treatment. It really depends on what you want to achieve. Your financial adviser will be able to advise you on the best products for your needs.
10. Use available tax benefits
Some investment products offer tax benefits that can really make more of your money. The effect of tax depends on your individual circumstances. Be mindful about the fact that the tax limits may change year by year according to the government budgets in Sri Lanka.
Read How to Measure
Your Risk Appetite
Your Risk Appetite
