Tips for Investing: Important Lessons from the Experts

Investing is both an art and a science; investors learn valuable lessons over time and with experience. However, most people want to learn without trial and error - instead, they seek expert advice. Our team at Ascent Accountants have significant collective experience supporting investors in navigating market cycles and trends. The following are nine key lessons that have stood the test of time.

 

Recognise the Cycles

An investing constant is the cyclical nature of markets. There are always phases of growth and downturns, with cycles repeating over time. Maintaining a long-term perspective during both the highs and the lows is essential, knowing that each cycle has its time.

 

The Crowd Isn't Always Right

Investor psychology often leads to herd behaviour, and when large groups of people make the same mistakes simultaneously, it can substantially affect the markets. Following the crowd can be tempting, but evaluating whether that approach is right for your strategy is crucial. Frequently, the crowd gets it wrong, and it's wise to go against the grain.

 

What You Pay Determines What You Get

The price at which you buy an asset is a significant factor in its potential returns. Lower-priced assets offer more room for growth, while overpriced assets may be overvalued. Metrics such as price-to-earnings ratios for stocks or bond yield can help guide your decisions, helping you evaluate each asset critically.


Predicting Markets is Difficult

Even professional market forecasters are influenced by the same emotional biases as regular investors, making accurately predicting markets challenging. For most investors, focusing on the long-term return trajectory rather than short-term movements is a better approach. Patience is critical if you want to reap investment rewards.

 

Markets Repeat the Same Mistakes

History tends to repeat itself, especially in the investment world. Investors continually fall into the same traps, often driven by fear or greed. Understanding that markets don't learn from the past can give you an edge. Stay current and aware of market extremes and resist the temptation to act on panic or euphoria.

 

The Power of Compounding

Over the long term, reinvesting returns can dramatically grow your wealth. If $1 had been invested in Australian shares in 1900, it would be worth almost $880,000 today. In contrast, $1 invested in cash would only be worth around $259, and bonds would yield about $924. This stark difference highlights the compounding power of shares over time.

 

Keep it Simple

The complexity of financial markets can be overwhelming, so keeping your investment strategy simple is often the best approach. Don't overcomplicate things, manage your debts wisely, and ask when you need help. Understanding, forward planning, and taking manageable risks yield better results over the long term.

 

Know Yourself

Every investor has their own risk tolerance and psychological tendencies. It's essential to understand your preferences and manage your weaknesses accordingly. A self-managed super fund or frequent trading might work for you if you prefer being hands-on with your investments. If not, a more passive, long-term strategy may be better.

 

Optimism Pays Off

At the heart of every successful investment strategy is optimism. Investors need confidence in the ability of banks to safeguard deposits, in borrowers to repay loans, in companies to grow profits, or in properties to generate rental income. Belief in the fundamental mechanisms of the economy is essential to take the necessary steps to start.

 

Get Support on Your Investing Journey

Investing requires patience, discipline, and self-awareness to help you build wealth steadily over time. Contact our Ascent Accountants team for further advice or assistance in managing the tax on your investment portfolio.  

Need help with your accounting?

Find Out What We Do
April 14, 2025
Thinking of buying or selling a business in 2025? Now might be the perfect time to make your move. With interest rates tipped to drop, new regulations coming in 2026, and a surge in buyer activity, the opportunities are out there. Click the link to learn more.
April 14, 2025
If you're running a business or earning investment income, you’ve likely come across the term PAYG instalments — but many people still aren’t clear on what they are, how they work, or why they’re even in the system in the first place. We’ve got you.
April 14, 2025
Thinking of selling your business? Buyers are looking at three key components: Goodwill, Plant & Equipment and Stock. Did you know they impact how much tax you’ll pay?
April 14, 2025
From adding a bedroom to updating flooring or a kitchen refresh, smart changes can boost rental income and capital value. Learn more in our latest article.
March 14, 2025
If your business interacts with the public — whether through customers, suppliers, events, or onsite work — public liability insurance can protect you against claims for injury or property damage. This generally covers legal costs and compensation, and although it’s not legally required, being sued for negligence can be costly (and bad for your business rep), so it’s highly recommended.
March 14, 2025
Co-owning a property can be a practical and financially beneficial arrangement, but when circumstances change, sometimes one party needs to jump ship. Whether due to financial strain, health issues, relocation, relationship breakdown, or differing property goals, it’s not uncommon for one co-owner to buy out the other. While this process may seem straightforward, there are several financial and legal considerations to consider.
More Posts