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22
BUSINESS CHICKS latte magazine
DOLLARS & SENSE
While it's natural to be nervous when financial markets are uncertain,
Adrian Raftery explains to it's important to stick to some basic
investment rules to help keep current market fluctuations in perspective.
Here are eight golden rules to help you
keep your investments on track.
1.
Timing ­
Whilst it is impossible
to predict the market lows, the greatest
returns in sharemarket history are made
when you can pick the share price at its
lowest.
2.
Dollar cost averaging ­
Don't buy
100% of your portfolio on the one day.
Spread it out over a number of months to
avoid the problems associated with market
volatility.
3.
Take your time ­
If you bought
when the sharemarket was higher, then an
important maxim is to stay in the market
and don't panic. Generally, what goes
down will invariably go up over time.
4.
Diversify ­
Diversifying into a number
of stocks reduces the risk of your portfolio
failing.
5.
Choose Quality ­
When markets fall
we often see that some great stocks have
been reduced too much and are actually at
a discounted price.
6.
Fully franked shares ­
Companies
that pay fully franked dividends provide a
better after tax yield than those that pay
unfranked because you get a credit of 30%
company tax already paid.
7.
Seek qualifi ed advice ­
If you're really
serious about something you seek advice
from a qualifi ed source. A fi nancial adviser
can help you make informed investment
decisions based on your needs, objectives and
personal circumstances, while taking
into account your attitude to risk.
8.
Don't overreact -
Investment markets
move in cycles, so it's diffi cult to forecast
when they'll rise or fall. Moving your money
in and out of the market during a downturn
means you could potentially miss out on any
positive `bounce' gained in a strong market
recovery. This view is supported by history.
For instance, research on the Australian
market since 1985 shows that the Australian
share market returned an average of 28% in
the year following a negative return.
Adrian Raftery is the CEO of
accountantsRus, a network of independent
accounting fi rms throughout Australia.
www.accountantsRus.com.au
Stockmarket Rules