Learn to view the inevitable declines as opportunities
If you're close to retirement, or if your investment time horizon is less than five years, it pays to be cautious.
However, longer-term investors (especially those with youth on their side) shouldn't fear sell-offs or market meltdowns at all.
When you're in the "accumulation" phase of your investment life cycle, these are better than a Boxing Day sale.
Focus on quality, in both equity and fixed income
Stick to the best when it comes to cornerstone holdings, and only consider investments that meet your quality and income requirements.
There are tens of thousands of shares you can choose from in the world, so why bother with anything mediocre?
Buying quality is even more important when it comes to fixed income. Don't put your hard-earned capital at risk in exchange for a slightly higher interest rate.
Invest for income growth
Income growth is the key to successful investing. Portfolios should always generate an income stream, but it's even more important for that income to be steadily growing over time.
Own a basket of companies that pay sustainable dividends, with the potential to keep growing them.
If you don't need the additional income, reinvest the dividend payments back into the portfolio and learn why Albert Einstein called compound interest "the eighth wonder of the world".
Review your holdings, and be willing to make changes
Investing is not a set and forget process. Your portfolio and its holdings need to be monitored and reviewed.
Not too often or you'll end up tinkering unnecessarily, but do a thorough assessment at least once, maybe twice a year.
You need an investment roadmap to get to your destination, and if your portfolio has veered off the path, make changes to get it back on track.
Look at your current position to see how it stacks up against your objectives, goals, and risk profile.
Don't be afraid to sell, even though it's often harder than buying. That might mean admitting you were wrong about a share or an idea, or it could just mean taking profits in a position that's worked well but has got out of whack.
Above all else, stay diversified
Some people think you should put all your eggs in one basket, then watch it very closely.
That's fine if you've got a perfectly working crystal ball, but for the rest of us it's not great advice.
Diversification will protect you from most financial disasters. That means having a good spread across asset classes, regions, sectors and companies.
It also means ensuring you have a portion of your portfolio invested internationally, as insurance against "New Zealand risk".
