Investing

How to... Make good investments

Whether you're a first-time investor or an investment professional, things happen. The key to avoiding problems is to keep on top of investment strategies, tax codes and annual reports

Steps

1. Study. Read financial news, finance web sites, corporate annual and quarterly reports, registration statements and prospectuses for the financial products you're considering.
2. Develop goals and strategies to meet your goals. Use these to choose shares and other investments. Ask for professional advice if you are uncomfortable investing on your own.
3. Diversify. Avoid putting large portions of your portfolio in a single investment so that you're not so affected by its movements.
4. Take advantage of tax savings by investing in ISAs or Stakeholder pensions.
5. Buy shares that you plan to keep for three to five years. Remember that at a low price, sell at a high price.
6. Invest in what you know, and avoid buying shares in unfamiliar industries and companies.
7. Shop for total value. That means learning to calculate key statistics, such as price-earnings ratios, so you can compare shares.
8. Resist fads. If everyone is buying gold, variable annuities or some other investment, watch out. The herd soon will change direction - look what eventually happened to the internet company boom of the late 1990s.
9. Know when to get out. Your objective may be to hold particular investment or mutual funds for three to five years, but if its track record looks like terminal descent, get out.
10. Things you'll need Financial newspapers, web sites and magazines Corporate reports Relevant prospectuses, Wall Street Journal