Saturday, August 29, 2009

My Top 10 Personal Finance Tips

Rule No. 1 - Never take Financial Advice from a Bank.

Rule No. 2 - Never, ever, forget Rule No. 1.

Rule No. 3 - Inertia is not your friend. It is the bedfellow of Financial Services Companies. Always look for cheaper alternatives.

Rule No. 4 - Be wary of the 'Past Performance' of Fund Managers as a reason to buy a product. It's irrelevant to what lies ahead.

Rule No. 5 - Educate yourself on investment and pension products so that you can eliminate the cost of financial advice.

Rule No. 6 - 'Free' Financial Review or 'Free' Impartial Advice - Where advertised; just steer clear.

Rule No.7 - Interview your Financial Advisor like you would a prospective key employee. Ask for references & recommendations.

Rule No. 8 -The average investor should not buy shares directly in companies. Low-Cost Index Tracking Funds is the way to go.

Rule No.9 - If you have to invest in a structured 'Tracker Bond'; only do so on a day that does not end with a 'y'.

Rule No. 10 - Diversify, Diversify, Diversify (your investments)- Over Asset Class, Sector and Region.


Liam D. Ferguson said...

Hi Gerard. On Number (4), I agree completely that past performance should not be used as the sole basis for choosing a fund.

But can you discount it entirely?

If a fund manager can show an ability to consistently beat their peer group average over multiple time periods (measured by an inpependent source), can we not conclude that their investment strategy and methodology is sound?

Gerard said...

I think that it is safer for the average investor to discount it entirely. Seeking out the criteria that you have referred to would realistically lead him/her to index-trackers.

It's just one of those debates that could go on for ever. While someone is weighing up the 'track record', analysing the strategy and methodology and factoring in the added value that may result, the manager may leave the team.

It's a personal view and tip for the average investor.