In a world where financial markets are becoming ever more accessible, but also more complex, financial education has emerged as a fundamental tool for investors. Now that there is widespread access to an abundance of information and investment products, the ability to discern, understand and act on this knowledge is crucial. The reality is, however, that many investors, even experienced ones, are still grappling with a considerable knowledge gap. Such a lack of financial education can ultimately lead to ill-informed decisions and, as a result, costly mistakes. Therefore, better financial education is not only encouraged, but essential for any investor looking to thrive in today’s investment landscape.
What is financial education?
Financial education is the foundation on which investors can develop a solid and lasting investment strategy. First and foremost, it enables investors to make informed decisions: understanding financial products, how they work and the associated risks is crucial to avoid blindly following a trend.
For instance, a great number of investors without adequate knowledge tend to try to ‘time’ the market, panic selling when prices drop or buying at record highs, which often results in losses.
Moreover, financial education helps prevent common missteps such as a lack of diversification, which can expose investors to unnecessary risk. Armed with a solid knowledge base, investors can develop and maintain a long-term strategy that aligns with their personal goals and risk tolerance. Ongoing financial education is key due to the complexity of the markets and the plethora of new investment products.
The importance of financial advisers and portfolio managers
As important as it is for investors to further their financial education, it is equally important to recognise the role of investment professionals, such as financial advisers and portfolio managers. This is not only because of the technical knowledge needed to navigate the financial markets, but also because they offer an objective and strategic perspective.
Financial advisers and portfolio managers not only provide assistance in devising a tailored investment strategy based on the client’s objectives and risk profile, but they also monitor and adjust the portfolio so it is in line with market conditions. This saves time and reduces stress, and significantly improves the likelihood of achieving long-term financial goals.
In addition, financial professionals can help investors avoid any mistakes associated with emotions, as it has often been proven that we are our own worst enemy when it comes to making investment decisions in the absence of adequate information. It is important to make investment decisions with a level head, following a clear and defined strategy.
Advice for today’s investor? It is important to stay abreast of the latest movements in an ever-changing environment. To this end, it is a good idea to subscribe to reliable newsletters and take the time to verify information when investing. There are also excellent websites and platforms with a wide range of content to help investors stay up to date on both financial markets and product analysis.
Investment policy
Investors should develop a clear financial plan and stick to it, adjusting it only when necessary due to shifts in personal objectives or market conditions.
Diversifying portfolios is also an important way to reduce exposure to specific risks and improve risk-adjusted returns in the long run. This diversification needs to be efficient, as having a small amount in certain asset classes does not diminish the overall risk of a portfolio.
In summary, financial education is key to investment success in today’s world. It allows investors to make informed decisions and build a long-term strategy in line with their objectives. Nevertheless, it is vital to supplement this knowledge with the expertise of financial advisers and portfolio managers, who play a crucial role in protecting and growing an investor’s wealth. These advisers and managers, under current regulations, are also required to stay up to date through an ongoing training program.
By combining financial education with professional support, investors can navigate the markets more safely and effectively, ensuring that their decisions are well informed and aligned with their long-term financial goals.
Citywire 13.09.2024