Let’s be honest, if you’re investing, your top priority is (or should be!) to improve your returns. The question is, how? While there is no foolproof
Let’s be honest, if you’re investing, your top priority is (or should be!) to improve your returns. The question is, how? While there is no foolproof way to spend less and make more, there are certainly a number of strategies you can employ for a better chance at success.
Whether you’re a beginner looking for some extra cash or practised investor who wants to up your game, here are five tips to help you improve your investment returns.
Diversify Your Portfolio
This almost certainly isn’t the first time you’ve heard someone mention the importance of diversification. That’s because successful investors understand that the market is volatile and always plan ahead. By diversifying your portfolio, you’re spreading your investment around to limit exposure and balance risk and reward.
Every portfolio looks different and there are a number of components you could add to yours: stocks, bonds, international stocks, short-term investments, sector funds, commodity-focused funds, real estate funds, asset-allocation funds, and more.
Don’t Try to Get Rich Quick
Especially during a bull market, it can be hard to resist adopting a ‘get rich quick’ mentality. But, there’s perhaps nothing more dangerous than the belief that you can double or triple your investment with the snap of your fingers.
The truth is, investing is a long-term game. Instead of measuring your success in the amount you make each month or even year, think of your returns over the course of decades. Stocks and index funds are both examples of long-term investments that require patience, commitment, and the ability to stay calm in a fluctuating market. But, it’s all worth it when you think that if you invested $10,000 a year in an index fund with an average return rate of 7% over 30 years, you would accumulate over one million dollars.
Look for Trades That Don’t Require A Lot Up Front
By lowering your expenses, you’ll increase returns in the long-run. Perhaps one of the easiest ways to do this is to start trading CFDs. Not only can you trade CFDs by only paying a fraction of the contract value, but CFDs also give investors the ability to make money in a falling market. But wait, there’s more…
Unlike with Spread Betting, any gains from CFD trading are eligible for Capital Gains Tax and any losses incurred are tax deductible.
Stick to Your Investment Strategy
To be a successful investor, you have to set up an investment strategy.
Because this set of rules will guide your investing behaviour, you need to be thoughtful in putting it together. That means you need to consider your attitude towards risk, your capital and your trading goals. There are passive and active strategies, dividend growth strategies and dozens more. The most popular and common investment strategies, though, are growth, value, momentum, contrarian and income.
Rebalance Your Portfolio
While rebalancing is often overlooked, it’s incredibly important in investing and will help you maintain your diverse portfolio. Let’s look at an example.
If your initial target was to have an equal split – 50/50 – of stocks to bonds, but after a prosperous stock market rally this shifts to 60/40. You’ve drifted away from your target and need to rebalance. How? It’s easy! You can either put some money behind the underweighted portion of your portfolio or sell a portion of the overweight portion.
There’s no hard rule as to how often you need to do this, but it is important to keep tabs on your portfolio and rebalance as necessary.