If you have considered the sharemarket too risky for you to include shares in your investment portfolio, you'll be interested in the answers to these questions.

Aren't shares too risky?
Shares do go up and down in value in line with the economy and business and world events. Nobody can tell in advance what your return from shares will be over the next twelve months. However shares do offer the potential for greater returns than other investment sectors.

How can I control the risks and still get the benefits from owning shares?
You can do this in two ways. First, diversify. Spread your shares across a number of different companies in different industries. Remember the old adage, "don't hold all your eggs in one basket".

Second, use time. Reduce risk by holding your shares for a reasonable period of time, 3 to 5 years or more. Shares carry greater risk of negative returns over the short term. However the longer you hold your shares the more certain you can become that your shares will provide a stronger return than other investments.

Don't you have to actively monitor shares and know when to buy and sell?
You will probably want to keep an eye on all your investments. Trying to buy and sell at the right time is fraught with danger unless you have the time and expertise. For most of us the accepted best strategy for shares is to 'buy and hold'. This means investing in good quality shares for a least three to five years. Profits can be made buying and selling shares over shorter periods of time. However, this is closer to speculation than investment.

If you have a diversified holding of good quality shares you will find that falls in price in some shares may be balanced by price rises in others. And when you remain committed to your investment over a period of time you should experience overall growth in your total share holding.

Why use a managed fund?
A good option for many people is to invest in shares via a managed fund. This active approach to share investment gives you a diversified holding of quality shares and the added comfort that a fund manager is doing all the selecting and monitoring, on your behalf, that you could want. There are fees involved, but the benefits of professional management definitely outweigh the costs.

Do talk to your financial adviser
Talk through investing in shares with your financial adviser. By including a long-term share holding in your investment portfolio you'll be managing risk and making your money grow.

The above material contains comments of a general nature only and should not be relied upon as giving any specific or general investment or financial advice of any nature.

Reproduced with the kind permission of ING Funds Management Limited

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