Any smart investor is always looking for the best ways to improve their portfolio. Surprisingly, not all of these ways have to be difficult. Here are a few easy ways that you can improve your investment portfolio and make sure that you are investing your hard earned cash wisely.
#1: Have a Diverse Portfolio of Equities and Bonds
In the last decade or so, some investors have been deterred from adding equities to their investment portfolio because stocks have been quite volatile. While the risk is higher with equities than bonds, the return is also significantly higher. The best thing you can do for your portfolio is if the volatility of equities has deterred you from adding them to your collection is add a few in relatively secure companies. This way, you will increase the diversity of your portfolio and can reap the benefits of a higher return on stocks.
#2: Choose the Right Way to Distribute Your Assets
Asset allocation is critical to improving your investment portfolio. There are several ways that you can distribute assets, including commodities, global bonds, small stocks, government bonds, international stocks, and more. When you diversify your assets appropriately, you can increase the expect return on your portfolio while significantly lowering the risk. Consider this- commodities such as oil, silver, and wheat have a relatively low risk for investors but a fair amount of return, while investing in stocks is considered more volatile but can have a high rate of return. Diversifying your investment among these and other areas will help you reduce overall risk and improve the overall return that you get from your investment portfolio.
#3: Don’t Forget to Rebalance Your Account
As you add investments to your portfolio, it is essential that you rebalance asset percentages. You should choose how to allocate your assets by putting a percentage of your money toward each type of investment until you have a satisfactory rate of return and risk. When you make changes such as adding or cashing in on an investment, the asset ratio will change. This requires rebalancing. Otherwise, you may find that your rates of risk and return are not where you expected them to be. You can rebalance by selling part of the over-weighted portion and reinvesting in the under-weighted portion, withdrawing funds from the over-weighted area of assets, or adding new investments to the area of your investment portfolio that is under-weighted.
#4: Manage Expenses Well
Some investors have a relatively high amount of expenses for their investment portfolio while others have expenses that are significantly lower. This is caused by the number of people employed to analyze your portfolio and the style of management that’s over your portfolio. There are two types of management styles for investment portfolios, either active or passive. A more active management involves regular monitoring of your portfolio by technicians, research analysts, brokers, and economists. Because you must pay each of these individuals, it is quite expensive. A more passive management style, however, does not require constant management of your portfolio. This is best for academic professionals or sophisticated investors, who have a grip of how they would like to manage their portfolio. Knowing what to look for when managing your portfolio also gives you a chance to do it yourself, saving a fair amount of money.
Improving your investment portfolio does not have to be difficult. By following these few easy steps, you can be sure that your portfolio is performing at top notch. Also researching where to invest, whether it be through the news, social media, or online websites, like Investwall, ensures that you are getting the most back with the lowest amount of risk.
Lautaro Martinez is a business man and financial guru who shares tips ands advice by writing articles. If you would like to learn more about Lautaro, feel free to view his Google+ profile.