The best place to put your hard-earned money is where it can make you some more money, the more the merrier. But with the plethora of financial investment vehicles that exist today, how do you pick and choose where to park your money? Is a higher return all that matters when you’re saving for your future? While a financial advisor would be the best person to help you with your investing needs, these tips provide an insight to a few time-tested strategies that work in the investment world:
* If you’re not experienced in dabbling in the stock market, put your money in mutual funds – the risks in one stock are balanced by the returns in another.
* For the stock market investor to make money, the knowledge of when to sell and when to buy is a must. Buying when prices are low and selling when they’re high is the most obvious strategy, but things do not always work like clockwork in a market where no one can achieve the perfect timing. The trick here is to adopt the dollar-cost-averaging method where you buy stock for a fixed amount of dollars on a regular basis, irrespective of the price of the stock. Accordingly, the lower the price of the share, the more shares you own, and vice versa. The reasoning behind this strategy is that you’re minimizing your risk because the average cost per share of the stock will become lower with time. Set a time frame that suits you, monthly or fortnightly, and work on this systematic investment.
* Avoid herd mentality by following the crowd and investing in a stock just because most people you know (or don’t know) are doing it. Invest according your needs and capital.
* Take time to plan your portfolio – allocate your assets to various financial vehicles according to your needs. This is the fiscal equivalent of the good old adage “Don’t put all your eggs in one basket”. The reasoning behind this approach is the definition of the term “getting higher returns”. It’s not enough that you manage to beat the market when the going is good – what’s important is being able to protect your downside when the going tough and the markets are down.
* High interest rates are good but they’re not always the focus of an investment. Oftentimes an investment may be made in a low interest-yielding option because of other advantages like tax deductions.