Two brains are better than one

Sometimes in life, we need a right-hand man, or right-hand woman, to help with those important decisions or jobs.

Company CEO’s have their COOs, professional golfers have their caddies, and assembling flat-pack furniture from IKEA is usually a two-person job.

When it comes to tackling our finances and investment decisions, it’s no different. Pairing up with another investor, to use as a sounding board or to provide challenge, could help improve your chances at investing success.

Let’s take a look at how it works in practice.

Buddying up

It’s quite natural to seek approval from others before we do something.

We ask questions like, ‘Would you buy these shoes?’ or ‘Do you think I should book that one-way flight?’, as we take comfort from knowing others would do, or are doing, the same thing. It’s a psychological phenomenon called social proofing.

However, when managing our finances and investments, we sometimes tend to tackle important financial and investing decisions with our blinkers on. That’s where buddying up and getting another opinion could benefit you.

Investing buddies act as a useful sounding board for all things financial. They allow you to talk through the rationale behind your investing decisions before pulling the trigger. More often than not, airing things out is a good way to weigh up both the pros and the cons.

Building an investment case for any investing decisions helps put emphasis on the importance of doing your own research before you trade. If you can’t explain what the stock does, why you want to own it and how it fits into your wider portfolio – that’s usually a tell-tale sign that you shouldn’t own it in the first place.

Your investing buddy is also there to throw back any challenge and act as gatekeeper for any emotionally-driven actions. For example, panic selling your investments after a bad couple of days in the market, or worries about blaring headlines in the news. We all know investing can be a case of mind over matter at times.

What makes a good investing buddy?

A good investing buddy is someone’s opinion you value and trust, and someone who has your best interests at heart – relatives, close friends or work colleagues normally fit the bill.

Buddying up with a person who doesn’t share the same views as you isn’t necessarily a bad thing. In fact, it can help with the challenge part of the process. For example, you might be very bullish about the outlook for the UK stock market, whereas your buddy is more bearish about the UK’s prospects. These are the types of conversations you want to be having to help with your decisions.

Bull vs bear – lifecycles of the stock market

Markets function best when investors have different views – it’s what pushes share prices up and down. You can only buy or sell an investment if someone else is willing to do the opposite.

Investors should avoid these conversations through online community pages like Reddit, or social media platforms like TikTok. Talks on these forums often revolve around high-risk speculative investing. Social media influencers paid to promote certain investments certainly don’t have your best interests at heart either.

Need a virtual buddy?

You can find lots of our expert insights, market news and views to help with your financial decisions or investment choices in the news section. Whether you’re looking for information to start your investment journey, retirement planning or simply looking to stay up to date with the latest market trends – we’ve got you covered.

If individual shares are your tipple of choice, our share research team write timely updates on a range of companies reporting their results and also share their view on company prospects. The updates are sent directly to your inbox – all you have to do is sign up.

We also have our weekly editor’s choice emails. This includes the week’s top investment stories and what it could mean for your money. Plus, expert research on funds, shares and other investments.

Sign up for editor’s choice emails

This article, along with the share research updates and editor’s choice emails, give you information to help make more of your money. But it’s not personal advice. If you’re not sure what’s right for your circumstances, please seek financial advice.

Your own research matters too

Once you have gathered opinions and views from others, it’s still important to do your own research. Any decisions you make should align with your goals and how much risk you’re happy taking – you’re the person best placed to make that call.

We’ve put together a three-point checklist to follow before making any decisions.

Investing checklist

1. Does the shoe fit?

Any investments you add to your portfolio should offer something different to what you’ve already got. Building an investment portfolio is a bit like building a football team.

Each investment should play a different role, and specialise in different areas. Although having a team of high-flying strikers might sound appealing, you’ll want some more reliable performers to help steady the ship should markets take a turn.

That’s what diversification is all about – spreading your money in different areas geographically, but also across various sectors and investment types, should mean you always have something doing well.

You can see what areas you might have too much invested in by using the portfolio analysis tool once logged into your HL account online.

2. Think big picture

A big picture mindset means looking long term and ignoring any short-term market blips.

Although it’s easier said than done, the worst investment decisions normally come from reacting to short-term share price movements. Avoiding the urge to check in on the value of your investments every day can make tinkering less tempting.

It’s important to remember, investing is for the long term. By long term, we mean for at least five to ten years. But if your circumstances change, like retiring earlier than expected, you might need to switch some investments to reduce your risk. That’s why we recommend reviewing your portfolio around once a year.

3. Sleep on it

The best decisions rarely come from ones made on the spot.

When we invest for the long term, what happens to the share price today or tomorrow doesn’t really matter all that much. What matters is the amount of time spent invested in the stock market.

Sometimes sleeping on things and coming back the next day can help take the emotion out of investing. The difference in price you pay from sleeping on things could be a lot less than the price you pay for any rash decisions.

We live in an age where placing trades online can be done in a matter of seconds. As an investor it’s worth asking yourself, would you place the same trade if you still had to place them via the post?