Investing now will guarantee your present and future financial security. While you grow your wealth, you can benefit from the power of compounding and generating inflation-beating returns. Investments can help you meet your financial goals, including:
- Purchasing a real estate property
- Accumulate a retirement kitty
- Build an emergency fund.
Here are popular investment options to grow your portfolio depending on your financial goals, investment horizon, and risk tolerance.
1. Direct Equity
Popularly known as a stock investment, buying shares gives you indirect ownership stakes in the company of choice. And as you invest in the long-term, it aids in capital appreciation. Stock investment offers you a huge potential to earn attractive returns every time the company makes a profit.
But it can also be a high-risk market, so you can consider buying from several successful startups and established companies rather than investing a huge sum in one company to distribute the associated risk. Accredited investors can buy and sell stocks of different private companies through the Linqto platform at zero fees.
2. Mutual Funds
Investors with a joint investment objective can pool their resources together for better returns. The funds collected can come from various sources like bonds, stocks, or money markets. And this investment option remains attractive to investors due to relatively moderate risk compared to direct equity, but it offers lower returns than the latter.
Mutual funds are flexible, as you can start or stop investing at your convenience.
3. Asset Allocation
You can allocate funds to a predetermined mix of stocks and bonds to distribute the investment risk. For instance, a 40/60 fund will maintain a 40% stock to a 60% bond or cash allocation.
If the fund is likely to alter its risk profile over time, you can choose the timeframe while the fund managers help you diversify, perform future readjustments, and re-balance on your behalf.
But asset allocation has one downside. Since target-date funds are built for the average investor, they don’t account for your individual preferences.
4. Retirement Savings
Setting aside a retirement fund gives you peace of mind and can help you focus more on other investment options. There are various avenues for saving up for the future, guaranteeing comfortable living during retirement.
5. Insurance Products
Insurance is an essential aspect of financial planning, and it prepares you in the event of a risk occurring. Depending on the insurance product you choose, the coverage helps you to meet specific objectives. Long-term care insurance, for instance, helps you to manage healthcare expenses so that you don’t have to incur the expenses.
6. High-Yield Savings Account
An online high-yield savings account pays high interest on your cash balance. And just like your traditional brick-and-mortar bank, you can readily access your funds by transacting directly, transferring to your primary bank, or via ATM. This account offers higher interest than traditional banks and can be an excellent way to diversify your investment portfolio.
7. Short-term Certificates of Deposits (CDs)
Certificates of deposits are good options when you expect higher rates. You can invest in these “time deposits,” and after maturity, you can re-invest your deposits at higher rates.
Tips to Grow your Investment Returns with Minimal Risks
If you have a startup, you can consider teaming up with other organizations that carry out similar business activities. Partnerships attract a more extensive customer base and guarantee a higher success rate, as it adds value to the brand or services you offer. It also distributes the risk of liability amongst all partners.
Vary Company Types and Size
A portfolio should have a mix of different asset categories: bonds, stocks, real estate, commodities, and cash. Your investment should include stocks of large and small companies in different industries, corporate bonds, and government bonds.
You can effectively pursue diversification through self-financing growth, joint ventures, strategic partnerships, and acquisitions.
Diversification is best pursued through self-financing growth, strategic partnerships, joint ventures, and mergers and acquisitions. But to do it successfully, you need to forecast the future trends in the industry strategically.
Know When to Sell Out
Buying and holding stocks of a well-performing company seem like a sound strategy. But it would help if you did not ignore the market forces at work. Stay current with the overall market conditions and any changes in the companies whose stocks you hold.
Doing so will help you to quickly tell when it’s time to cut your losses, sell out, and move on to the next attractive investment option.
Use Dollar-Cost Averaging to Build Your Portfolio.
Add your investments regularly into a specific portfolio of securities with the same amount of money over a specified period. Using the dollar-cost averaging strategy, you can buy more shares when prices drop and fewer shares when prices rise. This way, you can effectively cut down on your investment risk.
While you may prefer to spread your portfolio across domestic securities only, you may miss out on other global opportunities.
As more economies experience growth, international stocks and bonds continue to play a significant role in portfolio investing. Investors are now diversifying into international stocks to benefit from overseas growth.