The key to successful investing is often about diversification, and good portfolio management will help to ensure that you spread the risk across a range of opportunities.
Here is a look at some useful portfolio management strategies to help you try and make the most of your investments in a more structured way.
One of the most important aspects of successful investing is to try and achieve a balanced portfolio that involves spreading your money across a range of different sectors and investment platforms.
If you put all of your money into property, for instance, that would be fine if the value of that property kept rising every year, but if the housing market takes a downturn, all of your money will be exposed to those losses.
That is why it is better to put a percentage of your cash into different opportunities, such as stocks, property, gold, etc.
That way, you can ride the highs and lows of each sector and spread your risk so that gains in one sector offset losses in another, although you could enjoy gains in all over a longer period of time, with good picking.
Timing can often be crucial when it comes to making money from stocks and it is very difficult to know when the market is at its peak, or whether it has further to go in the short term.
If you invest a regular amount of money into a portfolio of funds you will be taking some of that guesswork out of the equation.
Often referred to as dollar-cost averaging, you will end up buying more shares at lower prices and less when they are more expensive.
When to cut your losses
There will be investments that perform badly and it can be tempting to hold out and see if the value recovers.
It is sensible to play a waiting game for a reasonable period of time so that you don’t crystalize losses, but it also makes sense to set limits and know when to call it a day and cut your losses.
Understand the impact of fees
If you invest in mutual funds and other similar opportunities you will be paying a manager to make investment decisions on your behalf, which means there will be fees to come off the value of your holdings.
Always keep a close eye on fees and shop around if necessary, but be mindful that cheapest is not always the best option as it might be worth paying a bit more if a fund is performing well and the returns outweigh the cost.
It is good to have a set of investing rules and to be disciplined in observing them.
Take a longer-term view that spans at least five years and review your options regularly so that you make adjustments to your portfolio. Also, stick to your risk-profile so that your investments don’t take you out of your comfort zone and cause you to lose your discipline.
If you adhere to these proven investment strategies and tactics it should help to improve your ability to generate a positive return.