Tuesday, October 11, 2016

Investment Management: How to Know You Are Making the Right Investment Choices

Investments can be risky. They can either get you a great reward or they might cause you a loss. But investments can really help out your personal finances and even your retirement plan. 

It comes down to having the right management when it comes to your investments. You want to make sure each one you make is calculated and that your chances of graining in money or assets has more of a chance of an increase than a decrease. 

With so many possible investment choices available to you, how do you know that you are making the right decisions about your portfolio? 

While investing is mostly a subjective endeavor, there are ways to determine what strategies may work best to keep your money working hard for you.

What's Your Time Horizon?

If you have 30 years to grow your money, you are most likely better off with a growth portfolio that is geared toward stocks as opposed to bonds. 

However, if you are closer to retirement, it may be better to preserve capital by investing in bonds or CDs. Index funds are a good way to preserve capital and achieve tangible rates of return for those who are in retirement or looking to keep building wealth throughout their lives.

Income or Long-Term Appreciation?

Dividend stocks allow investors to receive a steady stream of income on a monthly or quarterly basis. 

This may appeal to those who want increased liquidity or who want to use some of their returns now to pay bills or invest in other projects. Those who care more about overall returns for a long period of time should look for stocks that have a decade’s long record of consistent growth. 

Realistically, an adviser from a company like State Bank of Cross Plains will work with you and may tell you to use a mixture of both.

Are You an Investor or a Trader?

An investor is someone who buys a stock because he or she wants to hold it for a long period of time. A trader is someone who wants to make money off of short-term price fluctuations. 

Investors tend to prefer equities that will grow steadily over a long period of time while traders like volatility because it creates the price action that they need to profit in short periods of time.

Do You Think About Diversification?

A good portfolio is going to be diversified to create a cushion against any significant pullback in one part of the market. 

For instance, if the price of gold plummets, you may be buoyed by an increase in the price of education stocks. 

If the price of oil falls, the effect may be negated by a rise in real estate prices that can keep overall returns in the black until oil prices recover.

Do you Think About the Risks?

Every investment comes with a risk. For example, if you are looking to invest in stocks, you have to understand that stocks often tend to fluctuate. 

You want to make sure that you buy low and sell high if at all possible, but a lot of times when playing the stock market your investment doesn’t pan out the way you want it to. But it can also get you great rewards as well. 

Less risky choices would be with things like property. Just keep in mind though that there will never not be risk when you make an investment decision.

There is no surefire way to know whether your investment decisions are the right ones. All you can do is make educated choices based on your preferred strategy. As long as your portfolio is diversified, you stand a good chance of making positive returns in most years. 

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