MANY PEOPLE seek ways to make their money work for them.
They investigate various investment options, in the hope of high returns, that may not necessarily be guaranteed. As an investor, you may employ the following strategies to improve the way you invest.
DIVERSIFY YOUR PORTFOLIO
When investing, it is advisable that you vary the investments in your portfolio. Portfolios that are not diversified can be highly risky, possibly leading to enormous losses.
Try to think about your portfolio first, and your investments second. In other words, select investments that aren't similar to each other; don't place all your eggs in one basket.
Having done this, you can then go after investments in the same class.
You may find that by employing this approach, if you are losing with one set of investments, your other set may be stable, or better yet, generating impressive returns.
DO NOT USE NEWS TO TRADE
It is not advisable to use news as a determinant factor for trade. It isn't a guarantee that news will predict continuing trends in the rise and fall of investments, such as stocks.
Take for example, if news is used as a predictor, and you constantly purchase when the news is good and stock prices are rising, and constantly sell when the news is bad and the price of stock falls, this reaction may cause the stock prices to become unrealistically high or low.
REMEMBER THAT TRENDS COME TO AN END
Aim to keep your eyes on your investments. You may feel as if there is nothing major happening with your investments, and you tend to forget about it for a while, however, this trend may not last.
So keep in touch with your financial adviser, and aim to be abreast of things regarding your money/investments. This doesn't mean, however, that you shouldn't feel free to take on a little risk.
Your focus doesn't only have to be on avoiding short-term losses as you may in turn, limit your chances of superior long-term gains.
AIM TO MAINTAIN LOW COSTS
Remember that there is a cost side to investing.
This factor may be viewed as inconsequential to some investors because they are only caught up with the returns they make on their investments, however, it is not wise to dismiss the cost aspect.
For instance, tax costs can be extremely damaging to investments and could take a great percentage off your short-term gains.
Try to avoid investment products that have high tax rates applied to them, seek to place your funds in tax-free instruments whenever possible.
BUYING PAST WINNERS
Yesterday's winners may become tomorrow's losers. Bear this in mind when making investment decisions, and ensure you give viable new opportunities some consideration.
If a past investment is determined to be a bit profitable, note that the effect may be relatively small, won't last long, or may be difficult to capitalise on considering the transaction costs and taxes that may come into effect.
Take these strategies into consideration, and remember that there are financial advisers who can point you in the direction of investments most suited to your financial needs.
To further discuss investing and the many options we have available, contact DB&G at info@mydbg.com or toll free at 1-888-CALL DBG.
Taken from The Sunday Gleaner July 3, 2005
