Most people recognize the appeal of investing. Given enough time and some intelligently chosen assets, even a modest initial amount of capital can blossom into a rewarding source of wealth.
If you’re just getting started, however, you might feel confused, frustrated, or possibly even totally lost when you don’t see the returns you were expecting. How can you get more out of your investments?
What Does It Mean to “Get More” From an Investment?
“Getting more” is a somewhat vague phrase, so what does it really mean? The truth is, it implies different things to different people. But most individuals expect a combination of the following:
- A higher return. For many, a better investment is one that offers a higher return. An investment that makes 6 percent annually is better than one that makes 4 percent a year. Part of your optimization strategy will focus on generating more income.
- More consistency. Of course, consistency is also valuable. For some investors, especially those in retirement, it’s better to have an asset capable of providing stable, predictable returns – even if it means sacrificing some long-term gains. This is one reason portfolio diversification is so critical.
- Less stress. Investments that don’t demand much upkeep and which are less volatile typically involve less stress for the investor. When you’re not as anxious about your finances, your quality of life is more likely to be better.
- Personal satisfaction. Some people treat investing as a hobby, or even a sport. They invest partly to feel good about themselves – and to feel as if they’re winners, or that they’ve “beaten the market.”
How to Get More From Your Investments
So what steps can you take to achieve this?
- Stick to a plan. Too many investors make emotional, even irrational decisions. When the market takes an unexpected turn, these people react swiftly and negatively. If you want more stable, less stressful, and higher overall returns, it’s worthwhile to stick to a plan and continue making rational, thoughtful decisions – even if you’re freaking out inside. Document your goals and your investment strategy and hold yourself to your principles.
- Work with professionals. Hire professionals to help you manage your assets and, if you desire, advise you on your decisions. For example, you can work with a property management company to select better properties to purchase and maintain them in good condition, which requires little to no effort on your part. You could also hire a financial advisor to help you design higher-level plans.
- Perform proper due diligence. This should go without saying, but it’s a step many people neglect or skip altogether. Don’t assume you know what you’re dealing with. Don’t trust the word of a friend. Always do the necessary homework and double-check the details. Only move forward with a decision once you’ve fully grasped the potential benefits and risks.
- Diversify your portfolio. Strong portfolios contain a mix of assets – and diversity within those asset classes. You should have an array of items like stocks, bonds, real estate-related holdings, and even alternative investments (to a degree), and you should expose yourself to many different industries, markets, and locations. Do this, and you can protect yourself from risk, stabilize your returns, and earn more over the long term.
- Rebalance regularly. Diversification isn’t a one-time move. It’s an ongoing strategy best employed on a regular basis. In addition, over time your risk tolerance is going to change. That’s why it’s worthwhile to rebalance your investment portfolio regularly: assessing your holdings and changing them up when desirable.
- Take more risks. Don’t be afraid to take risks with a small portion of your portfolio. Even if you’re risk-averse, occasional steps outside your comfort zone with small amounts of capital can be a boon for your overall earnings. Just make sure you’ve calculated the risks and the majority of your portfolio remains in stable, reliable investments.
- Analyze your successes and failures. Execute retrospective analyses on your investment choices, and include both good and bad examples. Why did this investment pay off? Why did you lose everything on that other financial choice? The better you understand your own decisions in hindsight, the better you’ll make decisions in the future.
- Keep adapting. Finally, it’s vital to remain agile. Your knowledge and experience as an investor should grow over time, and given that growth, you should be prepared to make different decisions. As the years pass, markets will change, new technologies will emerge, and you’ll develop different priorities – so be willing to adapt to all of that.
Investing is best treated as a long-term strategy, so don’t let any short-term losses get you down or discourage you. As long as you stick to your principles and continue to learn and adapt, eventually you’ll achieve your full potential.