Step 5 Discipline

There are many different things to keep in mind when choosing what to invest in besides the asset itself. Most of these things relate to you. Your age, risk tolerance, goals and timeframe are all important things to consider. This is true in any circumstance, but especially so when investing internationally in markets that may be more risky, volatile and illiquid.

A diversified portfolio should always make money in the long term and because of this, one of the most common pieces of advice is to start investing at a young age. Dividends, compound interest and the historical tendency of the world’s economy to grow rather than shrink allows people who are younger to put their money into assets that are volatile in the short term, but hugely profitable in the long term.

Of course, not everyone has the luxury of time. Equities have outperformed all other assets in the long term, but most people have shorter term goals. For a person who is saving for a house, their child’s education, or retirement, a short term crisis in the market may ruin their plan entirely.

Many investment managers suggest allocating assets according to age.

The above model is one of many used by asset managers to recommend the percentage of allocation to stocks, bonds and cash their client’s portfolios, but as always, things are much more complicated to the global investor. For example, stocks are not simply “stocks”. Some companies are located in riskier areas of the world, some will be in financially stable jurisdictions, and most global equities will be bought in a different currency than your own, to name just a few differences.

Just remember: do not be greedy. It may be tempting to put all of your money into potentially profitable, yet volatile assets. But only put at risk what you can afford to lose.

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