Every investor’s goal is to maximize the value of their portfolio in the shortest amount of time with the least amount of risk. Strategic planning of the evolution and growth of your investments is essential to maximize your returns.
Your goal should be to balance a reasonable degree of risk with sound investment decisions and consistent contributions over time.
Determining what steps to take to maximize your profits can be a difficult prospect. Below are six proven strategies for maximizing your investment returns.
Take the long view
Rome wasn’t built in a day. And neither was your portfolio. The news of the day is filled with warnings of a coming bear market. Your well-meaning neighbor keeps telling you that it’s time to get out of the bond market and that now is the best time to invest in gold.
The worst thing you can do is get caught up in the rumors and get caught up in the latest investment fads. Stay the course. Develop an investment strategy and stick to it. Continue to contribute to your portfolio, especially in a down market.
Positive results take time, patience and perseverance. Because most get-rich-quick programs are guaranteed failures.
Reduce your investment cost
Investment expenses add up quickly. Fees are often overlooked because they are not paid discreetly in the form of a bill. They also seem low, specifically defined as 1% or 2%. However, compared to a large (or small) portfolio, they have a direct impact on the return rate of your investment.
For example, if you earn an average 9% return per year on your investments but pay 2% in fees, you have reduced your return to 7%. A 2018 Consumer Reports survey found that 46% of investors did not know how much they were paying in fees.
Do your homework and review your statements. Then, talk to your broker to determine the amount of your expenses. Look for costs identified as management fees, sales fees and maintenance fees.
Similarly, taxes are another hidden investment cost. Consult a tax attorney or CPA to ensure that your investment strategy includes minimizing your tax exposure.
Investment Diversification
The goal of diversification is to balance risk and return. We’ve all heard the saying “don’t put all your eggs in one basket”. This is the ultimate in diversification.
Asset allocation determines which category you invest in, but diversification is how you allocate your investments between and within categories.
A properly diversified portfolio will reduce overall risk because some of your assets will perform well and others will suffer losses, depending on how the market is performing at any given time. Therefore, your losses will be covered by your gains.
Good diversification can be difficult. That’s why you may want to consider investing in mutual funds. Many mutual funds are already diversified by spreading the underlying securities across thousands of companies and multiple assets, doing all your work for you.