These are the 9 golden rules of investing to hold on to despite market conditions. While markets are performing well it is easy to sit back and watch investments rise in value. However, it is a different story when markets are not performing so well and uncertainty abounds. Holding your nerve is not easy. So how do experienced investors handle this? Here are 9 tips:

1. Recognise the cycle

Financial cycle are all prone to move in cycles. Sometimes the throughs feel like they will last forever but they do eventually end and move on to higher levels.

2. Diversify

Diversifying is one of the most important rules for successful investing. By diversify across asset classes, markets, geographical regions, managers or companies, your risk is effectively spread out. This might minimise your potential losses and smooth out your investment returns over the longer term.

3. Avoid crowds

The worst time to invest is when everyone else is rushing in. Become a contrarian investor whilst still applying fundamental quality tests.

4. Buy and hold

Buy quality investments and hold them – at least until they have had time to achieve their expected return. Very few investors make money through speculating.

5. This time is not different

When the market goes dramatically up or down there is a tendency to cry “this time it is different.” This time is definitely not different.

6. Do not be swayed by high returns

Do not chase last years winners instead, look for this year’s opportunities.

7. Invest regularly

Implement a disciplined savings plan often referred to as “Dollar Cost Averaging” – a little bit often can build up to a lot.

8. Consider tax implications

If you are a wealth builder, seek capital gains in preference to income. If you need income, investigate different structures that help to minimise tax.

9. Have a regular check up

Review your investments and strategy on a regular basis. Work with a professional financial adviser who will help you achieve your goals.

You can also consider investing in a Halal managed fund where experienced portfolio managers will help you manage your investments. At Hejaz, our investments are actively managed to ensure that your investments are compliant and performing. Unlike others, we have an inhouse Islamic investment team we do not outsource this critical function, setting the management of your wealth as our priority.

Visit https://www.hejazfs.com.au/investments/ to learn more about our Islamic investment options or give us a call at 1300 043 529 to talk to our financial adviser about what best suits your situation. Our financial advisers can help you understand your risk comfort level and design an investment strategy that is right for you.

Managing your investment risk

There is hardly anything in life that doesn’t involve taking some risk – even getting out of bed in the morning! Many people are fearful of investing because all they focus on is the risk of losing their hard-earned money. Others look for great returns and forget about the risk entirely. As with anything, there has to be a balance.

In the majority of investment structures, risk and return are related. The more risk you take, the more return you can potentially make (and vice versa). But there are ways in which this “risk” can be managed without defaulting to low-return investments.

Here is a handy checklist to keep you focused on maintaining a balance and to minimise your investment risk.

1. Risk and return

To get ahead, your investment returns needs to take account of tax and also stay ahead of inflation. Many low-risk investments such as bank savings accounts often do not achieve that goal. To make any gains, you must take calculated risks.

2. Learn more and be aware

Many investment disappointments come from lack of knowledge. Learn how things work. The more you understand about investing and financial markets, the better you will become at choosing the right investments for you.

You will also be less likely to act blindly on a tip from a family member or friend, without first doing your own research. You must ask questions until you understand the investment. If you do not understand it, do not invest in it.

3. Rely on experience

Software and mathematical models can increase understanding but in the end it is people who make the difference. Smart investors seek the help of experts.

4. Never assume

It is easy to make assumptions and accept the information you are given. You must test the assumptions through questioning.

5. Understand the risks

It can be tempting to pretend that a risk is small if something sounds really good. You must accept that risk always exists. Discuss it openly with your adviser so it can be managed. Think about your goals, how soon you want to access your money and your risk appetite will help you make a decision on which investments are right for you.

6. Mix up your investments

Avoid putting everything you have got into one investment. Spreading your money across different types of investments may protect you from sudden market falls and deliver more consistent returns over time. The larger number of small and different investment risks you take can provide a higher probability of more consistent returns.

7. Stay focused

Be consistent and think long term. A rigorous and systematic approach will beat a constantly changing strategy every time. While there are exceptions, fluctuations in the value of your investments they should even out over time. So the longer you stay invested, the less investment risk you are exposed to.

8. Use common sense

Investing requires you to make judgements rather than following a script. It is better to be approximately right than to be precisely wrong.

9. It is not just about returns

It is all about risk and return. Accepting and managing the risk may help you realise the return you desire.

Just like achieving other goals in life, you need to decide how much risk you are prepared to take in chasing higher rewards. If the risk is just too much to bear, you can consider putting your money in one of our premier Halal managed funds where a team of experienced Islamic portfolio managers will help you manage your investments.

Visit https://www.hejazfs.com.au/investments/ to learn more about our Islamic investment options or give us a call at 1300 043 529 to talk to our licensed financial adviser about what best suits your situation. Our financial advisers can help you understand your risk comfort level, and design an investment strategy that’s right for you.

Investing in shares

Investing in the sharemarket provides a way of participating in the future profits and growth of Australian and international businesses. In Australia, there are more than 2,000 companies listed on the stock exchange, representing a market capitalisation of $1.69 trillion*.

Risk/return characteristics

Shares are generally considered a high-risk and high-return investment and are suitable for longer-term investors.

Historically, Australian shares have provided long-term growth well above inflation. However, shorter-term sharemarket returns have experienced higher volatility at times.

Sharemarket investors may expect a negative return approximately once in every five years or so, which is why shares are suited to longer term investors. Time greatly reduces, but does not eliminate, the volatility in returns from shares.

Sharemarkets move in cycles, reflecting the underlying strength of the economy, political factors, industry trends and market sentiment. On any given day interest rate and inflation expectations, company profits, dividends, economic growth figures and the rise or fall of our dollar may have an impact on share prices.

Income and capital growth

While shares are primarily a growth asset, they may also provide a good source of income.

Most companies distribute a proportion of their profits in the form of dividends. Companies that pay high dividends tend to be blue chip companies like those in the banking, insurance and retail sectors. Some companies, like those in the mining sector or newer industries like biotechnology, may retain dividends to fund future research, expansion or exploration.

Actual yields may change dramatically from year to year and vary from company to company. If company profits are not growing, dividends are likely to be stable and if profits fall, a company may have to reduce dividends.

Tax benefits

Dividend imputation is the main reason Australian shares are so tax effective. Given companies have already paid tax at the company tax rate, investors can use franking credits to offset the amount of tax they pay on dividends and have any excess credits refunded. The higher the franking level the greater the benefit.

Some companies pay fully franked dividends, with the maximum imputation credit of 30 per cent (equal to the company tax rate). Other companies pay partially franked dividends where the imputation credit will vary depending on the amount of tax they have paid on their profits.

Implementing your portfolio

You can invest in the sharemarket directly or through a managed fund. One of the major benefits of a managed fund is that you can access a much wider range of investments than you can investing directly yourself. Another is that your assets are professionally managed.

Index-tracking traditional index funds and Exchange Traded Funds (ETFs) invest in all or a representation of stocks in a selected index with the aim of producing index returns, before fees. By contrast, many active Australian share funds hold between 30 and 70 stocks, out of a universe of around 200 to 300 securities depending on the index used.

*Australian Securities Exchange. End-of-month valuation, July 2015.

At Hejaz Financial Services, our investment products are build and managed by expert teams with years of experience and deep, human understanding of markets. Learn more about our Premier Islamic Financial Services here.