12 Investment Principles to Help Investors Maintain Momentum

When it comes to investing, having set principles in place helps investors maintain momentum in their investment journey. Often, individuals managing their own investments may find themselves influenced by both internal and external factors. 

René Basson, Head of Brand and Marketing at Satrix, shared the importance in being grounded by set principles, especially in the beginning of an investor’s journey. “We live in an age where we are inundated with opinions, whether from people, qualified and underqualified, and even AI. But when it comes to personal finance and investments, being steered by external factors is a dangerous route to follow.” 

“For this reason, we’ve compiled 12 Investment Principles that investors, new and seasoned, may find useful in keeping themselves grounded and motivated, and consistently steering toward their goals.” 

1. Emotional Regulation

Markets can be volatile – this is a natural part of investing. The investment environment is influenced by social and economic developments, and, in uncertain times, investments may go up or down. In these instances, the best thing to do is not to panic and or make any rash decisions. 

2. Avoid the Herd (Mentality)

Nobody likes to miss out on the wins. Following trends and the latest ‘money makers’ plays into our financial and emotional insecurities. However, following the herd and listening to the noise can be expensive in the long run. Even if it feels like ‘everyone’ else is doing something, it’s always best to follow your own plans and path. 

3. Minimise Costs 

High fees eat into your returns. Even the ones that seem ‘small’ do add up over time. Transaction costs, management fees, advisory charges, and fund expense ratios can all reduce your overall investment returns. Scrutinising the relationship between your investments and your fees may make a world of difference in the long term. 

4. Long-Term Focus 

Maintaining perspective and keeping the bigger picture in mind also helps to calm short-term jitters (see point 1). This is a practical application as well; most online performance charts default to the one-month view. Zoom out and look at an investment’s performance over longer periods to drive this point home. 

5. Keep Compounding

Earning returns on top of returns already made makes for magic. That’s the power of compounding, which is famously referred to as the eighth wonder of the world. The key to making it work is the accumulation factor, which, for most investors, happens over time.  

6. Manage Risk

Risk is part and parcel of investing – it can’t be avoided.  It’s therefore important to understand what you’re investing in and the level of risk of your chosen investment. Understanding these levels of risk will help you manage your own expectations when it comes to performance. 

7. Diversify

As a principle, not keeping all your eggs in one basket isn’t a cliché – it’s a proven way to diversify your investment risk. Diversifying your exposure across different investment vehicles, asset classes, and even geographies help manage risk. Diversification also means spreading your wins across different sources.  

8. Understand Your Investments

The more you know, the better. It will help you make informed decisions about what you’re invested in. The more you understand, the more confident you should feel about your investments and markets in general. ‘Understanding’ includes costs, how they work, opportunities, limitations, and what kind of risk is involved. 

9. Review, but Don’t Tinker

Checking up on your investments occasionally is not a bad thing, but tinkering constantly is. Some investors may feel the need to make changes every time they take a peek at their portfolio, whether it’s to sell because of a dip or to rejig the weighting of their investments to favour a trending or high-performing asset. Trust the process you planned for. Often, the best course of action is to do nothing. 

10. Efficient Asset Allocation

The weighting of your assets is key to managing your exposure to risks and returns. When it comes to portfolio construction, your comfort is key to determining how you allocate your assets. It would be counterintuitive for an investor who is nervous about market swings to have 90% of their investments be in volatile assets, and vice versa.

11. Remain Consistent

Consistency is key to growth, and this is especially important when it comes to investing. Making regular investments, no matter how small or big, is the best way to maintain your momentum and achieve the goals you’ve set for yourself. 

12. Time in the Market Beats Timing the Market

Unfortunately, investing and the markets aren’t a perfect science, nor do investors have a crystal ball to see into the future. Trying to time the market means pinning your future on luck rather than a strategy. Just starting, and more importantly, staying invested, puts you in the best position to grow your investment portfolio. 

“These 12 principles aren’t the be-all and end-all of investment principles, but they’re a start. What they will do is help investors to adopt an approach that ensures they make informed and disciplined financial decisions.” René says. “With more experience and time, investors tend to chart their own unique paths.”

Disclaimer

_{Satrix Investments (Pty) Ltd is an approved FSP in terms of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision.}

_{Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities and an authorised financial services provider in terms of the FAIS.} 

_{While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.}