Investing and improving your investment plan: 6 steps to success

Have you already taken your first steps in the world of investing and set up an investment plan? That's great! But investing is a dynamic process, and your plan needs constant care and attention to keep it in line with your goals and the market. Just like a car needs regular maintenance to keep it in good shape, your investment plan needs a tune-up from time to time to achieve the best results.

This article is for investors who want to improve their investment strategy and get the most out of their finances. We dive deeper into the world of investing and look at how to take your investment plan to the next level.

1. Portfolio optimisation: are your investments still balanced?

Over time, both your personal circumstances and the market situation will change. What worked yesterday may not work today. That's why it's important to review your portfolio regularly and optimise it if necessary.

Revaluation of asset class breakdown:

Does your portfolio allocation still match your risk tolerance and objectives? Perhaps you have moved on in your career and your income has increased, allowing you to take on more risk. Or, on the contrary, you are retiring and need a more stable income stream. Analyse your current portfolio and consider whether the asset allocation needs to be adjusted.

Considering new investment opportunities:

The world of investing is constantly evolving. From time to time, it's worth exploring new investment opportunities that can add value to your portfolio. For example:

Alternative investments: Cryptocurrencies, works of art, collectibles. These are high-risk investments with potentially high returns.
ESG investments: Investments that meet environmental, social and good governance (ESG) criteria. ESG investments are increasingly popular and can offer positive social and environmental impacts in addition to financial returns.

Improving the risk diversification strategy:

Diversification is the bedrock of investment. As an experienced investor, you may want to consider refining your diversification strategy by investing in different sectors, geographical areas and currencies. This will help to further reduce risk and protect your portfolio from market fluctuations.

Think strategically:

Analyse the performance of your portfolio: Have all your investments performed as expected?
Check market trends: Which sectors are growing? What are the risks?
Consult a financial adviser: If you need help optimising your portfolio, don't be afraid to ask for professional advice.

2. Refining your investment strategy: find your approach

If you've been investing for a while, you're probably familiar with different investment strategies. As an experienced investor, you can refine your strategy and find an approach that suits your goals and risk tolerance. It's like updating your investment wardrobe - see what's out of fashion and what's new to add!

Advanced strategies:

In addition to passive and active investing, there are a number of other strategies used by experienced investors. Here are some examples:

Value investing: It looks for undervalued stocks with the potential to increase in value in the future. This requires in-depth company analysis and patience. Warren Buffett is one of the best-known value investors.
Investing for growth: Investing in fast-growing companies with the potential to generate high returns in the future. This strategy is riskier, but also offers higher return potential.
Dividend investing: Invests in companies that regularly pay dividends. This strategy offers a stable income stream and is well suited to investors seeking passive income.
Timing the market cycle: It tries to predict market ups and downs and invest accordingly. This is a complex strategy that requires good market knowledge and analytical skills.

Market timing:

Market timing is a strategy that seeks to buy shares when their price is low and sell them when their price is high. However, it is a very complex and risky strategy because it is difficult to predict market movements. Many experts recommend investing for the long term and avoiding market timing.

Technical and fundamental analysis:

Technical analysis: Examines price charts and trading volumes to predict future price fluctuations. It is suitable for short-term trading and market timing.
Fundamental analysis: Examines a company's financials, the business environment and other factors to assess its value and future prospects. It is suitable for long-term investment and value investing.

Knowing both types of analysis will help you make better investment decisions.

Portfolio rebalancing strategies:

Portfolio rebalancing is important to ensure that your portfolio allocation matches your risk tolerance and objectives. There are different rebalancing strategies:

Balancing time: You rebalance your portfolio at regular intervals, for example every quarter or year.
Percentage rebalancing: You rebalance your portfolio when the asset class allocation has changed by a certain percentage.

Choose the strategy that suits your investment style and timeframe.

Think about your strategy:

Is your current strategy still effective?
Do you have the knowledge and time to invest actively?
Are you familiar with the different methods of analysis?
Are you ready to risk market timing?

3. Optimising taxes: an informed investor is a tax-smart investor

Taxes are also important to consider when investing. In Estonia, income from investments is subject to different taxes, which can affect your returns. Therefore, it is important to be aware of tax laws and possible tax breaks.

Important information on taxes:

Different investments, different taxes: Different tax rates may apply to different investments. For example, income from the sale of shares and dividends is taxed differently.
Tax incentives: There are a number of tax benefits related to investment in Estonia. For example, contributions to pension funds are exempt from income tax.
Tax laws are changing: Tax laws are constantly changing. It is important to keep up to date with current legislation.

How to be a tax-efficient investor:

Find out about tax laws: Before you make any investment decisions, read the tax laws carefully.
Find out about tax credits: Find out which tax incentives apply to you and how to use them.
Consult a tax adviser: If you have any questions about tax, consult a tax adviser. A tax adviser can help you find the best solutions to optimise your taxes.
Follow changes in tax laws: Keep up to date with changes in tax laws so you can adapt your investment strategy accordingly.

For more information on taxes:

Estonian Tax and Customs Board: You can find information on tax laws and tax incentives on the website of the Tax and Customs Board.
Financial portals: Financial portals often have articles and guides on taxes.
Books and seminars: Books have been written and seminars organised on taxes.

Remember that tax optimisation is part of a successful investment strategy. By being aware of tax laws and incentives, you can improve your investment performance.

4. Investment monitoring and analysis: keep an eye on your investments

As an experienced investor, you know that investing is not a "buy and forget" strategy. Regularly monitoring and analysing your investments is crucial to success. It's like reading a map on the road - you need to know where you are to get to your destination.

Use of advanced analytical tools:

In addition to simple return calculators, there are a range of more sophisticated analytical tools to help you analyse your investments in more depth. For example:

Portfolio monitoring software: Helps you monitor your portfolio's returns, risks and asset class allocation.
Financial analysis tools: Help analyse the financial performance of companies and assess their value.
Economic data analysis tools: Help monitor economic indicators and market trends.

Monitoring productivity and risks:

Monitor your investment returns regularly and compare them with your targets. Also analyse the risks in your portfolio and make sure they match your risk tolerance. Some important indicators to monitor:

Production: How much return have you earned on your investments?
Risk: How much risk are you taking with your investments?
Volatility: How much does the value of your investments fluctuate?
Correlation: How are your different investments linked?

Documenting investment decisions:

Document your investment decisions so you can analyse them later and learn from your mistakes. Write down why you made a particular investment, what your expectations were, and how the investment actually worked out.

Think analytically:

Do you monitor your investments often enough?
Do you use appropriate analytical tools?
Have you learned from your investment decisions?

5. Psychological aspects: managing emotions in the investment world

Investing is not just about numbers and graphs. It's also about psychology. Emotions play an important role in investment decisions and can have a significant impact on your results. As an experienced investor, it is important to be able to control your emotions and make rational decisions.

Controlling emotions when making investment decisions:

Hirm: It is easy to panic and sell off your investments during a market downturn. But this is often the wrong decision, because it locks in your losses. Try to keep a cool head and stick to your investment plan.
Ahnus: When the market rises, it is easy to get greedy and take too much risk. But it can also lead to big losses. Don't let greed influence your decisions.
Unbearability: Investing is a long-term process. Don't expect quick results. Be patient and stick to your plan.

Knowledge of the principles of behavioural finance:

Behavioural finance studies how psychological factors influence investment decisions. It helps you understand your own behaviour and make better decisions. Some important principles of behavioural finance:

Cognitive biases: Our brains often make decisions based on preconceptions and emotions, not logic. Be aware of your biases and try to avoid them.
Livestock instinct: People tend to imitate the behaviour of others. This can lead to irrational investment decisions. Make your own decisions and don't get carried away.
Anchoring: We tend to base our decisions on past experience. This can prevent us from seeing new opportunities. Be open to new ideas and don't be afraid to change your strategies.

Reading books on investment psychology:

Investment psychology Many books have been written about. Reading them will help you to better understand and control your emotions. Some good examples are:

"Thinking, Fast and Slow" From Daniel Kahnemanilt
"Misbehaving: The Making of Behavioural Economics" Richard Thalerilt
"The Art of Thinking Clearly" From Rolf Dobellilt

Think about your emotions:

How do your emotions influence your investment decisions?
Are you aware of your own prejudices?
Can you control your emotions?

6. Creating a long-term strategy: building a secure future

As an experienced investor, you are probably not limited to short-term goals. You have a vision for your financial future and a desire to build a solid foundation for your and your family's well-being. This requires creating a long-term strategy that takes into account the different stages of your lifecycle and the challenges you may face.

Saving and investing for retirement:

Retirement is a time to enjoy the fruits of your labour and devote yourself to your hobbies and family. But saving and investing for retirement is a long-term process that requires planning and discipline. Some important aspects:

Start early: The earlier you start saving for retirement, the more time you have to grow your money.
Take advantage of tax incentives: In Estonia, there are a number of tax benefits linked to saving for retirement. For example, contributions to a pension fund are exempt from income tax.
Diversify your investments: Divide your retirement investments between different asset classes to reduce risk.
Monitor the performance of your pension fund: Make sure your pension fund has performed as expected.

Setting long-term financial targets:

As well as saving for retirement and planning your inheritance, you can also set yourself other long-term financial goals. For example:

Buying property: Buying your own home is a dream for many people. It's also a good investment, offering a stable income stream and inflation protection.
Funding for children's education: Education is the best investment you can make for your children. Save and invest in your children's education to give them the best start in life.
Charity: If you want to make the world a better place, you can donate to charity. It's a great way to use your money and give back to society.

Think about your future:

What are your long-term financial goals?
How do you plan to save and invest for retirement?
Have you thought about estate planning?

Creating a long-term strategy will help you achieve your financial goals and build a secure future for you and your family.

In addition:

Participate in seminars and training: Investment seminars and training sessions provide valuable information and the opportunity to meet other investors.
Join investment forums: In the forums, you can share your experiences and learn from other investors.
Follow investment news: Keep up to date with economic events and market movements.

Things to remember:

Critical thinking: Don't believe everything you read or hear. Check information from reliable sources.
Continuous learning: The investment world is constantly changing. Follow trends and learn new things.
Take responsibility for your decisions: Investing involves risk. Make your decisions consciously and responsibly.

A smart investor is an informed investor. By taking advantage of the resources and tools available, you can improve your knowledge and make better investment decisions.

Summary

Together, we have now gone through the most important aspects of refining an investment plan for experienced investors. As we have seen, it is an ongoing process that requires awareness, strategic thinking and adaptability.

Key points to remember:

Optimise your portfolio: Regularly reassess your asset allocation, consider new investment opportunities and refine your risk diversification strategy.
Refine your strategy: Choose the approach that's right for you, whether it's active, passive or a combination. Use different analytical techniques and consider the risks of market timing.
Be patient: Check the tax laws, find out about tax incentives and consult a tax adviser if necessary.
Monitor and analyse: Use more sophisticated analytical tools, track returns and risks, and document your investment decisions.
Get your emotions from him: Don't let fear, greed and impatience influence your decisions. Learn the principles of behavioural finance.
Create a long-term strategy: Plan for retirement, consider inheritance planning and set long-term financial goals.

The investment world is constantly changing. It's important to be flexible, to keep learning and to adapt your strategy as needed.

We wish you the best of luck in your investing and encourage you to keep improving your financial knowledge!