You can never have too much money in the bank or working for you in the stock market. Therefore, you should always be thinking about ways to improve your portfolio and get the most from your investments. A big part of investing is being wise about your strategies. You can obviously gain the most by minimizing your losses and maximizing your gains, but this is easier said than done. Sometimes it pays to remember the basic steps that come together for big successes. Below are some strategies that you can use to build and maintain an effective economic portfolio.
Don’t Forget Real Estate
Real estate is a powerful way to diversify your portfolio while reducing your risk. You can either buy physical properties such as home or office buildings or buy shares of a REIT or real estate ETF. Investing in real estate is also a good idea because you can pass it on to future generations and establish their financial security.
The most basic way to invest in real estate is to purchase a property and rent it out to tenants. You’re responsible for paying the mortgage, taxes, and maintenance, and the rent can help you do this. You can also join a real estate investment group if you don’t want to be a landlord. This way, you will own one or multiple units of a larger property the group owns.
Don’t Stop Investing
As anyone with a will tell you, you should make it your goal to invest on a regular basis. Even if you just reinvest your dividends into the same companies or mutual funds, you will achieve exponential compounding growth. Putting money into a private fund outside of an IRA or 401K is a good idea as long as you have income regardless of your age.
Create a Mix of Risk and Caution
While you don’t want to invest all of your money in risky growth stocks or emerging market funds, you also don’t want to invest exclusively in government bonds either. Ideally, your portfolio will be allocated between the cash you keep in the bank, growth stocks that allow for greater returns, and safe returns that preserve capital while still giving you some sort of return.
It can be hard to engage risk head-on; losses are easier to remember than gains in your mind, but don’t leave large amounts of cash sitting idle. A moderate risk portfolio can deliver significant returns annually over the long term.
Stick to Your Own Investing Philosophy
While it isn’t a bad idea to seek out advice when you need inspiration, you should ultimately develop your own philosophy for how you invest. For instance, you might decide that you only invest in companies that have given out dividends for the last 10 years.
Invest for the Long-Term
Over time periods of a decade or longer, the stock market tends to offer steady and predictable returns. Therefore, make sure you have a long-term plan and stick to it. Investing in index stocks or mutual funds may make it easier to implement your vision and prevent emotion from derailing your plan. It’s important to keep this long-term consideration in mind, as well as keep a broad perspective. This is especially the case if you’re wealthy, as you may be more sensitive to short-term geopolitical events and feel losses more acutely than gains. Focus on prioritizing the preservation of capital rather than pursuing growth.
Putting money in stocks, bonds, and other investments can help build wealth at a rate faster than inflation. Through diversification and long-term planning, you can build that wealth at a steady rate and count on it to be there for you as you need it.