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Building successful portfolio with basic investing rules

Mar 31, 2020
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For building successful portfolio

 

Walking through the financial maze of stocks, bonds and mutual funds can be quite a challenge. We offers the following tips to give you the know-how on building a profitable portfolio.

* Know your goals. Consider how much money you’ll need for your children’s education or your retirement. Whatever your vision for the future might be, set your goals and develop a concrete plan for meeting them.

* Define your investment time horizon. If you’re not planning on retiring anytime soon, you might want to have a portfolio that includes more long-term investments. If retirement is just around the corner, consider a more conservative approach.

* Determine your risk tolerance. Figure out your risk comfort level and compare that with what you can afford. In general, the longer you have to invest, the bigger risk you can take.

* Consult a professional. In order to avoid financial pitfalls later on, it is often wise to seek professional guidance when putting together a portfolio.

“Recent research shows that investors continue to grapple with some of the most basic investment concepts, suggesting a greater need for financial advice and guidance,” said Doug Lockwood, a certified financial planner.

Investors need to develop a personal investment strategy, whether they are new to investing, seeking guidance but still want control over their investment mix, need help positioning their portfolios with a long-term perspective or need help understanding how the markets work.

 

 

Important rules on investing

 

Investing your money can be a great way to ensure your financial future. With the right investment choices, you can be sure to have money for emergencies. Example, to put towards the education of your children and to have available when the time comes for you to retire. There is a key word in the preceding phrase however. If you make the wrong investment choices, you may just end up where you started or worse, flat broke.

Most people who invest wisely by making the right decisions with their money follow the same basic investment pattern. Although they may define it by another name. It might be that you are the cynical type who chooses to believe. that is, the basic rules could not possibly be as easy as they seem. Especially in an area that seems so complex. It is true. However, that these rules have withstood the test of time.

First of all, make sure that the money you choose to invest is indeed earmarked for the purpose. As in any form of gambling, there is nothing to be gained and everything to be lost when it comes to investing. Do not put up money that you cannot afford to lose should the market take a downturn.

One rule that people seem to refuse to apply in any area of their lives, including the world of investing, is lean not on your own understanding. Most of the time, this is the result of people balking at entrusting another person with their money. They believe that with a little understanding they can work the market themselves.

This reasoning is fundamentally flawed. In the first place, most people will not be able to begin to unravel the complicated graphs, pie charts, and statistics by which the investment world relates its information. In order to understand what the numbers mean, you will need to have some basic training.

There may come a time after you have had some experience in the market. You will be able to make sound decisions on your own then. But the initial get-your-feet-wet phase is not the time to attempt it. Check the background of the advisor you choose, as there are a lot of brokers out there looking for a quick fleece. The best brokers will have years of experience and a variety of investment backgrounds. This will probably cost you much less than you might think.

Think long term. Unless you invest millions of dollars initially, it will take time for your investments to mature and begin to accumulate substantial gains. The best investments are proven over time, and thus it is best to place your funds in long term choices. The details of this are plain- it is best to forget about this money in terms of a cash fall back, at least for a number of years.

Diversification is an oft-flogged truism of the investment world. A good portfolio will include cash and cash equivalents (GICs, fixed annuities), growth investments (stocks), and growth and income investments such as mutual funds.

Diversification ensures that you do not have all your eggs in one basket. Even should any part of the market experience a downturn. Note that diversification means not only investing in several areas, but also making sure that no one area contains a disproportionate percentage of your funds.

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