Investing is not a simple passive income generator. It requires research, work and commitment. If you are just starting out as an investor, it will take some time before your investments yield profitable returns. Your investments need a strategy to be successful. Just putting money into the stock market is not a smart strategy. You will need to carefully and considerately build an investment portfolio over time that can last through economic downturns and is resilient to the unpredictable money market. Read ahead to find out how you can build a successful investment portfolio.
Aggressive, or Conservative?
First, you must decide what kind of investor you want to be. Do you want to aggressively pursue traded stocks for higher returns at a higher risk, or do you want to let your investments slowly grow over time at less risk? The investments on your portfolio should reflect whether you want to be aggressive or conservative. If you want to be a high roller, you can invest in the stock market, consider a REIT to profit from real estate or invest directly in a business. On the other hand, if you want to incur as little risk as possible, your portfolio should include safe options like fixed deposits and government bonds.
Buy Established Stocks
When you are starting out, you will not be in a good position to assess risk and determine which stocks are the best. Most likely you will have no idea which stocks to buy. Therefore, in the beginning it’s best to buy established stocks from trusted companies like Google, Facebook or Apple that do not show even the slightest sign of failing anytime soon. Buying established stocks will initiate you into the business of investing, and will be a great starting point to begin learning the ropes.
No investment portfolio is a good portfolio unless it’s diverse. You should never pour all your money into one venture. That is a surefire way to lose your capital in case something happens. You can protect yourself against unexpected turns in the economy by diversifying your portfolio as much as possible. Your investments should be well balanced between low risk and high risk ventures. Diversification does not mean buying stocks from different companies in the same industry. For example, if you have Google stocks and Facebook stocks, your portfolio is not diverse. Both are tech companies, which will be similarly impacted by downturns in the tech industry. If you want your portfolio to be truly diverse, you could buy tech stocks, then agricultural stocks, stocks from a foreign company that won’t be affected by fluctuations to the dollar and invest in non-stock ventures like precious metal.
Consider Joining a Mutual Fund or an ETF
At first, diversifying an investment portfolio on your own can seem a daunting task. It would be better to join a mutual fund, where you can add your funds to a pool of investments managed by a professional financier. Your money will be invested in a diverse array of ventures. You will have to pay a commission, but it will save you a lot of trouble. Alternatively, you can consider an exchange traded fund. An ETF is like a mutual fund that is traded like a stock. The biggest difference between the two is that ETFs are not managed by anyone.
The key to making your portfolio profitable is planning ahead. Diversify, anticipate economic upheavals and invest smartly. Sooner rather than later, you will also have a successful investment portfolio generating stable returns.