DIY Investor Magazine
| August 2017
43
David A Norman
CEO, MAPS &
TCF Investment
From an original article
by Paul A. Merriman
Successful investors
don’t expect miracles
and don’t base their plans on unrealistic
expectations
or hopes for good luck. Your luck
may be good, but it can just as easily be bad.
When I was an adviser, I encouraged investors to
build their plans on expected returns significantly
lower than the historical averages. Here’s what that
means in general terms: If the long-term trend of
the stock market is 9%, make your plans on the
assumption that your own stock investments will
earn 6%. That will require you (or at least strongly
encourage you) to save more; that in turn will
always serve you well.
If your returns exceed your expectations, you’ll have
no trouble adjusting. But if things go the other way,
you could wind up short of what you need to retire.
Successful investors
don’t ignore taxes
; to
whatever extent you can, use tax-advantaged
vehicles such as ISAs and pensions depending on
your situation.
Outside these accounts, investment sales generate
taxes. Sometimes even the timing of a simple
mutual fund purchase can generate unnecessary
tax liability, as when you buy shares closely
before a mutual fund’s dividend or capital-gains
distribution
Having avoided the other traps on this list,
successful investors
don’t get caught up in the
incessant financial commentary in the media.
Commentators always have at their disposal two
‘lists’ of explanations for whatever is happening and
whatever developments seem to be just over the
horizon.
The ‘good news’ list is always filled with plausible
arguments for why the market will go up and
therefore why investors should buy; the ‘bad news’
list is always filled with equally plausible arguments
for why the market is overdue for a downward trend
and therefore why investors should sell, or at least
avoid buying.
Successful investors
don’t go it alone
. You
may connect with others online, you may join an
investment club or you may pay a professional for
advice; helping with your plan, keeping you on
track, guiding your decisions, being there when
things get tough.
Make sure you gain from the experience of others
– advisors are experts who have spent many
hours passing exams and being approved by the
regulator and could make a big difference to your
outcome; elsewhere there will be a DIY investor
with similar goals and circumstances to you –
sharing experiences and opinions can be a great
way to benefit from the power of the crowd.
You only get one go a retirement planning – paying
a little for an expert to guide you on the journey
could be a very sound investment – whether that is
for regular ongoing advice or an occasional review
and financial health check.
