A penny saved is a penny earned, as they say, but that’s not always the case. Sometimes, your pennies just sit there rather than piling up, and depending on where you place them, they might take a plunge and disappear altogether.
While investments can be a great way to build wealth, you need to be careful about your choices. Otherwise, an investment for the future could turn out to be just a money pit that backfires on you. The goal is to make the most out of every investment opportunity using tips and tricks that can increase the performance of your portfolio. Here’s how.
1. Diversify Your Investment Portfolio
If you want to make the most out of your investments, diversify them. There are all sorts of asset classes you can put your money into to reduce risk—without reducing reward. You can widen your investment horizon with a mixture of stocks, bonds, mutual funds, certificates of deposit, and so much more.
That way, if asset takes a hit, the portfolio will still perform with the other classes it contains. For example, if the stock market plummets, you can rest assured that a significant portion of your funds are held safe in other assets.
2. Cater Asset Allocation to Achieve Your Goals
Different asset classes also offer different cashflow, meaning how and when you receive your returns will vary. Commercial real estate property can be a great source of regular income, whereas high-yield, high-risk investments such as penny stocks could make you a large amount of money in a short amount of time.
What are penny stocks? They’re shares of small, public companies that initially trade at a very low price (usually under $5, but sometimes cheaper than cents on the dollar, which is how they get their name).
They can be really exciting for investors looking to buy low and sell high, yielding enormous returns, but their prices can fluctuate dramatically, which means you’ll need to be an active day trader—unless you hire an investment manager to actively monitor the market for you. Otherwise, you might miss the right moment to sell and find yourself stuck with a bunch of stock.
(Note: A “day trader” is an investor who regularly trades securities on a daily basis, as opposed to others who grow their investments over the span of several years, or even decades.)
Think about your investment timeline and choose your asset allocation accordingly. If you’re saving for your children’s education, then you can find slow but stable growth in the form of bonds. If you need a quick turn around on capital gains, then you’ll need a more aggressive strategy.
3. Invest as Much as Possible, as Soon as Possible
The sooner you start investing, the harder your money will work for you thanks to compounding interest over time. Retirement may feel like a lifetime away, and you might think that your money could be better used elsewhere in the present but spending over saving can cause you to miss out on serious cash.
To get the most out of your investments, purchase securities as soon as possible. If your employer offers a 401k plan, see whether they’ll match your contributions and then contribute that amount from each paycheck to take advantage of the extra cash for your family.
The power of interest is a pretty big deal, so don’t miss out on substantial earnings because you waited too long to invest.
4. Earn More from Your Investment Property
Those who own an investment property should ensure they do everything they can to make the property more profitable. You can consider renovations that increase its value to drive a higher monthly rent price, such as bathroom remodels and landscaping work.
It’s also important to choose high-quality tenants who will respect the property, pay rent on time, and ideally, stay for quite a while. The cost of tenant turnover can be pretty steep between repairs, vacancies, and advertisements, so try to incentivize renewed leases. Raise the rent price incrementally to reflect the state of the economy so that you can earn more while still treating your tenants fairly.
At the end of the day, only a professional can give you the most qualified investment advice, but these sound strategies can help your portfolio perform better so you can enjoy greater returns.
