5 Ways To Make Your Investment Portfolio More Impressive
Written by
Sean Bryant
Edited by
Rebekah Evans
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Building an impressive investment portfolio takes time and a lot of planning. You’re not going to see years’ worth of results overnight. However, by defining your approach and having a vision, you can ensure you’re creating an investment portfolio with oversized returns.
Keep reading as we explore what you can do to make sure your portfolio is more impressive than most.
Understand the Importance of Diversification
Diversification is one of the most important concepts that any investor needs to practice. By creating a well-diversified portfolio, you’ll have investments spread across many different sectors and asset classes. This will put you in a better position to withstand market volatility.
This could mean investing in technology, consumer staples and healthcare companies. It can also mean not only investing in the stock market but having a portfolio that includes precious metals, real estate and even cryptocurrencies.
Allow Your Risk Tolerance To Determine Your Asset Allocation
As an investor, it’s important to understand how much risk you’re willing to take on. As a younger individual, you have time on your side. This allows you to take on a little extra risk to potentially have a stronger return. This means having a portfolio that includes more stocks than bonds. It could also mean having high-risk assets like emerging markets or cryptocurrencies. All things that can amplify your returns.
However, if you’re further along in your career, you’ll want to be more risk averse. If your portfolio suffers a loss, you won’t have as much time to make up those losses. For this reason most portfolios become weighted heavier with things like bonds and risk-adverse stocks the older you get.
Understanding how much risk you’re willing to take on and matching that with the correct asset allocation will be the key to having strong yearly returns on your portfolio.
Do Your Research
Most people don’t buy a home without researching everything there is to know about it. You want to know how many bedrooms, bathrooms and the square footage. You might want to know what school district it’s in or what the shopping is like nearby. The same kind of research needs to go into your investments.
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Before investing any money, it’s crucial to understand everything there is to know about the business. What do the financials look like? Do they have strong revenue growth? Do they have cash on hand or do they have a lot of debt on their books? Is there a lot of competition in their industry?
Digging into a company before investing will help you make smarter investment choices. In most cases, it will help you achieve higher returns.
Avoid Making Emotional Decisions
It’s easy to get caught up in what’s happening with the stock market. If economic news comes out and it puts the markets in freefall, most people will panic. And while big drops in the market can be scary, it’s important to remember that you’re in this for the long term. More times than not, the market will bounce back after a big decline.
Avoid making any decisions based on fear. Hopefully, your investments were made based on strong research. Remember that and have confidence that you’ve made the moves to be successful in the future, even if things aren’t looking great in the present.
Understand Your Costs
While most online brokers don’t have a cost to invest, there are things you need to watch out for. If you’re investing in mutual funds, look for no-load funds. Load fees can be charged either when you purchase a mutual fund or when you sell. Both are going to drastically cut into your returns.
If you’re working with a financial advisor, understand what their commission fee structure looks like and make sure they’re a fiduciary. This means they’re always going to have your best interest in mind. They only make money when you make money.
By understanding all your investment costs and finding ways to minimize them, you’ll be able to maximize the return you can achieve.
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