Six keys to long-term investing

We have no miracle cure to recommend to our customers during tough market conditions. What we offer is a reminder of some sound, basic principles that have stood the test of time and proven their merit in a range of market conditions.

1. Be crystal clear about how much risk you can handle

When you invest in the stock market, you make a trade-off between the possibility of losing some of your money in return for the potential to make more money. The idea is that the more risk you're prepared to take, the higher the potential returns.

Finding a balance between the level of risk you can accept and the level of returns you want to achieve is central to making a good investment decision.

Importantly, there's no right and wrong answer when it comes to working out your attitude to risk. It's all about finding a balance that you're comfortable with, so you can make your investments and still sleep at night, especially when the stock market ride becomes rocky.

If stock market falls make you nervous about your investments, speak to a financial adviser to review your investments and make sure that (1) you are clear about your attitude to risk and (2) your investments match your attitude to risk.

2. Diversify

Put simply, this means using a mix of different investment types (i.e. cash, bonds, property and stocks & shares) within your portfolio. By not 'putting all your eggs in one basket', you reduce the overall risk of your portfolio while still aiming to achieve the best potential returns. This is because at any time, if one investment type isn't performing well, another is likely to be doing OK. This will smooth out your overall returns over time by reducing the ups and downs along the way.

A well-diversified portfolio is the best way to help you reach your long-term financial goals while minimising the risk along the way. It could consist of some risk-free cash products right through to higher risk stock market funds. How much you invest in each would depend on your goals and matching the risk you're prepared to take with the riskiness of the underlying asset.

This is an area where financial advice can really help.

You can spread your investments in a number of ways including:

• Across assets - make sure you have a balance between cash, stocks and shares, property and bonds.
• Across countries or regions - why narrow your investment opportunity to the UK only when you can tap into the growth potential of the world!

When times are tough in markets, the trick is to avoid the temptation to hide your money under the mattress. Check your savings and investments with a financial adviser to make sure you have a good balance.

3. Maintain the courage of your convictions

Many people believe that information and knowledge is essential to be a successful investor. But just as important is having - and maintaining - the right attitude.

How can you do this?

In practice, for many people, it can be as simple as not looking at the value of your investments on a day-by-day basis. It's sensible to review your investments every 6-12 months and consider their performance at these intervals. Any more frequently, and you may end up causing yourself unnecessary strain when markets are turbulent.

If you are getting nervous during tough times, do a quick investment health-check:

• Can I still afford to have this money put away for the long-term? (the 'affordability' check).
• Can I still accept the same level of risk over the long-term? (the 'attitude to risk' check).
• Are my goals and objectives still the same? (the 'aspiration' check).

Your financial adviser can help you to answer these questions. Importantly, if you are still heading for the same destination, then you may do best to stay on the same course, despite choppy waters along the way.

4. Time, not timing

You may be taking a big gamble if you try to work out the best times to buy or sell your investments. 'Timing the market', as this is called, is fraught with danger and can be costly when you get it wrong.

One way to avoid the risks of 'timing the market' is to spread your investment through a series of single lump sum investments or a regular monthly savings plan. This is because you are cushioned from ups and downs in the stock market since you are buying your units at a variety of prices and over a period of time. This is the principle of 'pound cost averaging' in which you'll get more units when markets are down, and less units when markets are higher.

The other benefit of this approach is that it takes the hassle out of trying to time market rebounds, which is notoriously difficult to do, even for the experts. Bear in mind, however, that if you could have invested a single lump sum it is possible to lose out if the market is on a rising trend.

5. Find experts you trust to take the worry out of investing

When markets are unpredictable and volatile, it's important to know that your money is in safe hands. Take the time to find investment managers who you trust with your money. This can give you peace of mind knowing that experts are working to protect and grow your savings over the long-term.

6. If you're not sure, talk to a financial adviser

You're not alone when it comes to investing. A good financial adviser can help in a number of ways:

• By reviewing your overall financial situation and helping you to get your finances in order.
• By acting as a sounding board for your views and ideas.
• Supporting you in applying the keys to long-term investing to your own situation.
• Helping you to make the right decisions about any changes you should make if your circumstances or needs change.