Five tips for beginner investors

Written by Snowball Effect · Published on Tue, 7 September 2021

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Whether you’re a new investor or have dabbled in a few investment opportunities before, there’s always plenty to learn, especially from an experienced investor who has been there before. We sat down with Lewis Hurst, an experienced investor, to find out what his five tips are for investors wanting to grow their portfolio.

If you missed part one of our interview with Lewis Hurst, then check it out here.

1. Create a financial plan

“There’s a lot of financial advisors that spout off generic comments about portfolio diversification. But it’s important to put together your own budget to know how much you can set aside to invest. Then do a financial model to work out how much you’re going to need to save to reach your goals and how much return you’re going to need on your investments, compounded annually, to reach those goals. It’s also important to take into account failings and things that happen on the way like buying a house, having kids, or a car unexpectedly breaking down.”

2. Consider the level of risk you’re comfortable with

“Your financial model will show you how much risk you can take on when investing, when you can take that risk, or even if you have to take the risk. It will help you define the split in your portfolio of how much will go on for example the NZX and how much will go on private equity.”

3. Do your own due diligence

“Just because someone else invests in something doesn’t mean it’s safe or good for you to invest in... What I recommend people do is write down your findings and justify your opinion. It’s amazing how often there are things you think you know about a company and then you go to find a source for that information and find it’s wrong.”

4. Have a backup plan

“When you’re investing, have a plan B, C, D and E and constantly review your financial models. Your plans are going to change every year depending on how your investments go and the level of volatility you have. Also, when you consider liquidity factors when buying shares, keep in mind that your personal requirements can change over time.”

5. Consider your exit strategy

“When I buy shares, I don’t pre-decide when to exit. I just make sure that there is an exit if I need one for that allocation of money. For smaller investment amounts, I don’t expect to have an exit, but I’ve set up my portfolio to allow for that. They’re sort of written off, which makes them toys, which is nice.”

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