How to... Make good investments

Whether you're a first-time investor or an investment guru, mistakes happen. The key to

avoiding mishaps is to keep on top of investment rules, tax codes and annual

reports

From How To Do Just About Everything to Succeed, in association with eHow (Collins,

£9.99)

Steps

Study. Read financial news, personal finance magazines, corporate annual and quarterly

reports, registration statements and prospectuses for the financial products you're

considering.

Develop goals and strategies to meet your goals. Use these to choose shares and other

investments. Ask for professional advice if you are uncomfortable investing on your own.

Diversify. Avoid putting large portions of your portfolio in a single stock or

industry so that you're not so affected by its movements.

Take advantage of tax concessions by investing in ISAs or
Stakeholder pensions.

Buy shares that you plan to keep for three to five years. Remember that at a low

price, sell at a high price.

Invest in what you know, and avoid buying shares in unfamiliar industries and

companies.

Shop for total value. That means learning to calculate key statistics, such as

price-earnings ratios, so you can compare shares.

Resist fads. If everyone is buying gold, variable annuities or some other investment,

watch out. The herd soon will change direction - look what eventually happened to the

internet company boom of the late 1990s.

Know when to sell. Your objective may be to hold particular shares or mutual funds for

three to five years, but if its track record looks like terminal descent, bail out.

Things you'll need

Financial newspapers and magazines

Corporate reports

Relevant prospectuses