To invest successfully typically requires some discipline, and if it’s not your day job, the ability to leave things to the experts. Five keys to investing are:
- Invest for the long term – if you can time the market you might get a better return, but if you miss time the market the return will be worse, and it’s hard to pick. Staying invested is a better strategy.
- Look less – if you check the value of your investments too regularly, you’ll be disappointed and likely sell at the wrong time.
- Risk and return – you need to consider your spread of investments to allow for risk and return and liquidity. If you want higher return this typically comes with higher risk and the potential for higher losses. If you stay in liquid assets such as cash the return is lower.
- Diversification – spread your money around different investment types to create a portfolio. The best performing asset this year is unlikely to be the best performing next year, but it’s hard to tell which asset will be in advance.
- Residential property – as an investment, it can stack up over the long term but there are trade-offs to consider. It is harder and takes longer to buy and sell than listed assets and it’s harder to get diversification across sectors and countries. Right now, affordability and rising interest rates may not be the ideal time to invest. The returns over the long term (including capital growth and net rental income) are compared to other assets in the chart below.
Remember, investing is a long term game. Stick to the long term strategy and adjust only as necessary.
Please see the full article for more of Shane Oliver’s thoughts.
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About the Author
Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.
Important note: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.