The golden rules of high-risk investing

Published by Sarah Coles on 05 May 2010.
Last updated on 05 May 2010

book of rules

Invest for the long term

You should be happy with the level of risk you're taking and understand that investing in higher-risk areas requires a longer timeframe. These markets will see some spectacular gains and losses over the short term. If you don't have a long time horizon and cannot lock your money away, then you risk needing to access it just as it falls in value.

Don’t panic when things go badly

Selling up if the markets move against you will simply crystallise losses. You may review your investment and decide that the fundamentals of the market have shifted and it's worth looking elsewhere for opportunities. However, it's best to hang on through these bumps, especially in a more volatile area, as the market will eventually recover.

Diversify your portfolio

Every portfolio should have a range of strong, core, reliable investments as well as some that involve a little more risk. By diversifying your investments and spreading risk, if one or more of the funds perform badly, the performance of other funds will help level out the overall performance.

Drip-feed investments

It is best to invest through regular monthly savings rather than one-off lump sums. Known as 'pound cost averaging', buying some units at the top of the market and some at the bottom, means overall you will never make a terrible timing mistake.

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