10 golden rules to grow your savings
This list gives some basic guidance for growing your savings, but it is not definite; Each person has individual restrictions and requirements that needs to be considered, and the world of savings and investments is changing continously with new opportunities and challenges appearing all the time each requiring an unique assessments
1) Spread your money on sveral different investments classes, instruments, countries, sectors and companies. Such diversification increases the return and lowers the risk of your investment portfolio
2) Most people have the opportunity to invest in 5 main classes of investment assets: Fixed income, shares, investment funds, properites and other opportunities. The investment classes have different expected return and levels of risk. Allocate your savings to each class according to expected risk and reward, and within each class find the best investment opportunities
3) Keep a long term perspective. Investment markets may fluctuate a lot and you may lose money on transaction cost due to excessive trading and on buying and selling when blinded by greed and fear
4) It is a sound investment practise to invest by paying a price that is lower than the long term asset value, the intrinsic value, and hold the investment until the asset reaches its full potential. By buying cheap you limit your downside and increase your upside
5) Stay away from savings products and investments that you are not able to assess. You need to understand all key value drivers and all major risks. Taking risk is a natural part of investments, e.g. house price uncertainty for property investments, but investing in savings products and investments with insufficient information or that are too complex to understand, puts your money at unecessary risk
6) Before investing, analyse key macroeconomic, industry specific and company specific value drivers. Assess their possible future development and the liklely impact on your savings products and investments
7) Make sure the provider of savings products and the management of the companies you invest in have incentives to maximise your money. E.g. avoid companies where the management has share options as these increase the managements incentive to take risk, but look for companies where the management has a long term shareholding. You should also assess if your financial advisors have incentives that may work against you
8) Stay objective and do not let yourself be driven by greed and fear. To achieve this understand your own investment style, assess your long term risk appetite, diversify broadly, set investment and savings targets and reveiew regularly your performance
9) If an opprtunity sounds too good to be true, it probably is. Understand the risks, get prpfessional advice and take your time before accepting any deal. If this is not possible, let the opportunity pass
10) Making your money grow is about discipline, thoroughness, patience and hard work
Good luck!