Investing in 2023-24: five golden rules to consider to grow wealth

A new financial year can feel like a new beginning for investors, but experts say some strategies should remain for decades.

It’s a bit of an understatement to say that investors have had a rollercoaster ride of financial returns and emotions in the past few years.

Since the start of 2020 we’ve seen a record high sharemarket turn into a Covid crash, then a big rebound, then more heavy falls last year, and another rebound in recent months. If there’s a pattern there, I don’t like what it suggests is coming next.

Real estate investors, too, have had a bumpy ride. Riding high before the pandemic, they suffered a sharp fall then almost immediately a strong rebound that pushed property prices to record highs, followed by weakness in most markets last year before stabilising this year.

Fixed interest investors faced carnage, with 2022 their worst year in decades, while deposit holders are finally seeing respectable interest rates after years in the doldrums.

If you want to know what direction investments will head in 2023-24, toss a coin.

However, there are some golden rules for investing that have stood the test of time and are often recommended by financial specialists and successful investors.

Whatever happens next, remember these rules and you should end the year in better shape than many.

1. IGNORE THE HERD

Follow the advice of investment billionaire Warren Buffett, who famously urged people to be fearful when others are greedy, and greedy when others are fearful.

The best investment bargains are often bought when everyone else is selling, and remember that many markets are cyclical – so try to avoid buying at the top.

2. DIVERSIFY

Spreading your money between different types of assets – shares, property, infrastructure, fixed interest and alternative investments – and also across different countries reduces overall risk and smooths out returns.

Investors face continued uncertainty in 2023-24. Picture: iStock

Some people still have all their investment money sitting in one rental property, or just a couple of ASX-listed shares. If something damages that single investment, their wealth can get smashed.

3. AVERAGE IN

Buying bits and pieces of assets over time often works better than going all in at once. It’s known as dollar-cost averaging, and it means you do not inadvertently end up investing at the top of a cycle only to suffer from a prolonged downturn.

Superannuation follows this strategy automatically as regular contributions buy more investments often.

Dollar-cost averaging can also help build a positive investment habit of gradually growing wealth, and before you know it you are richer than you expected.

4. WATCH THE WORLD

Investors now live in a global marketplace, where gyrations in economies and financial markets can appear to look like a crazy interpretative dance with arms and legs flailing everywhere, independently of bodies.

However, they all tell a story, and that story is likely to impact investment growth and decisions.

Russia’s invasion of Ukraine last year had a huge impact on markets. China’s economy is watched closely. The shift to renewable energy and electric vehicles is impacting many Aussie stocks, especially in mining and energy.

Keep an eye on global events and how the future may impact your investments made today.

5. INVEST FOR THE LONG TERM

People wanting to get rich quick are at a greater risk of losing everything, because they gamble rather than invest.

A buy-and-hold strategy is an important wealth-building tool for all but active traders.

If you invest in quality assets regularly and hold them for years and decades, compound interest will inevitably work its magic on your wealth.

Originally published as Investing in 2023-24: five golden rules to consider to grow wealth