According to Investopedia, most investors are searching for ways to grow their portfolios during their investment journey. Fortunately, there are several ways to expand an investment portfolio. However, the most effective strategy depends on different aspects, including time horizon, risk tolerance, and the amount of principal an investor can invest.
Establishing a long-term and viable investment portfolio can be daunting if you lack the right information and strategies. Fortunately, there are many tips you can leverage to achieve this objective.
Here are the top six tips you can leverage in growing your investment portfolio:
1. Buy and Hold
An effective way to grow your investment portfolio is to buy and hold. Often, the investors who purchase and retain them in their portfolios usually get surprised by the outcome. An investor who leverages a buy-and-wait approach is often not worried about short-term price changes.
2. Adopt Diversification Strategies
Most investors often leverage the diversification strategy alongside other strategies, including the buy-and-hold approach. Diversification can help reduce or eradicate vicarious risks, including company risk. Several reports indicate that asset allocation is vital to investment return, particularly over extended durations.
By diversifying your portfolio to include cash, stocks, and bonds, you’ll better position your portfolio for growth under a relatively less risky and volatile portfolio. Often, diversification is successful because when one investment asset performs poorly, others will be functioning properly.
3. Dollar-Cost Averaging (DCA)
The dollar-cost averaging is a popular approach you can leverage alongside mutual funds to grow your investment portfolio. With this strategy, as an investor, you’ll need to assign a particular dollar amount you’ll utilize in occasionally buying shares of single funds.
Since the price of mutual funds keeps evolving from time to time, you can reduce the overall costs depending on the shares since fewer shares often get sold whenever the price rises and additional shares are purchased when the price goes down.
Therefore, dollar-cost averaging enables you to benefit significantly over time. More importantly, as an investor leveraging the DCA strategy, you won’t need to worry about purchasing at the top of the market.
4. Market Timing
Suppose you’re an investor who regularly follows the stock markets or certain investments. In that case, you can outsmart the buy-and-hold approach if you’re capable of timing the markets precisely and regularly, but whenever the prices are at the minimum and sell when they go up. More often than not, this approach produces better returns compared to holding your investment over time.
Suppose you’re a normal investor who doesn’t follow what’s trending on the market daily, refrain from using the market timing approach. Instead, you can concentrate more on other investment strategies that can grow your portfolio, especially long-term ones.
5. Make Careful Investments in Growth Industries
Are you an aggressive investor looking for strategies to expand your investment portfolio? If so, consider investing your cash in industries with better growth. These may include construction, technology, and healthcare, to accomplish average returns in exchange for volatility and greater risk. You might even consider investing in something like CougsRise BYU Digital Collectibles. You can offset several risks by making careful investment choices and holding for an extended time.
6. Steer Clear of Risky Assets and Behaviors
The golden rule many investors use to grow their investment portfolio is ‘keeping things simple.’ Here, you can adopt passive investing by leveraging index funds. On the contrary, assets like derivatives, leveraged funds, actively managed funds, and commodities are only suitable for some investors. That’s because, often, such assets have unique risks ideal for hedging or speculation.
Moreover, the investment behavior you adopt can make or destroy your portfolio. Any actions you partake in as an investor, irrespective of whether they’re illogical or logical, can cause serious repercussions. Below are a few of the common behaviors you should steer clear of:
- Avoid tinkering with your investment portfolio too much
- Desist from relying on previous performance
- Avoid timing the market when possible
Concluding Remarks
There are several straightforward strategies you can employ to grow your investment portfolio. Likewise, there are more complicated strategies individual investors and other organizations leverage, including derivatives. These approaches regulate the risk you take when investing and enhancing potential benefits. If you’re keen on growing your investment portfolio, adopt these six tips.
