This is one of the classic investor dilemmas, how to invest your money in the most profitable way. Remember the best ways to invest money are not just the ones that yield a higher profit. Traditionally, the investing basics dictate that you must look for the best match between your investment objectives and profitable investment tools. This is why investment strategies are crucial. They help you put a plan in place and create a systematic investment channel.
We decided to make your task a lot easier by helping you grasp these investing basics in a simpler fashion. Here are the ten most useful investment strategies that will always keep you a step ahead of peers and help your money grow faster than the rest.
1. Do Your Research Well: You should be very clear about where you are investing and how much. The ground rule, in this case, is to understand the instrument you are investing in well. Don’t invest when you are not very clear about the specific option. Also be thorough with your research. For example, if you are keen about a particular MF, don’t just look at the 1-year or 6-month return, go deeper. Check the 5-year, 10-year and if needed the 20-year returns too. Be very sure.
2. Create An Investment Plan: A systematic investment plan is a secret way to invest money most profitably. This will make sure that you are investing a certain pre-decided amount at regular intervals. Moreover, an investment plan brings forth potential deficiencies too. For example, if your investment allocations are not well distributed, this plan helps you to identify them and then go on to make it useful. This is one of the cardinal advantages of going with a plan.
3. Make An Early Start: One of the best known investing basics is about starting early. The earlier you begin investing, the higher is the return for you. Apart from the benefits of compounding, you also get the advantage of a considerably higher principal. You will also notice that an early start also tilts the balance favorably in the risk-reward tug of war. In fact, there is never the best time to invest. The right time is always now. Start with whatever small amount you can and then keep expanding gradually. This also makes your investment goals a lot more realistic than you would have thought.
4. Set Your Goals For The Longer-term: When you are considering the different ways to invest money, this is one of the most pertinent points. You must have heard that old saying, “a rolling stone gathers no moss.” Well, it is true in the investment parlance also. You have to hold on to your investments for a considerable period. That is essentially how you will get the desired returns that you are looking for. Trying to get exorbitantly high returns over the short-term may not always bear fruit. Many times, it also involves a lot higher degree of risk than you may be comfortable with.
5. Focus on Your Investment Objective: That brings us to the key issue, what exactly is your investment objective. In fact, this is one of the investing basics. Often the objective will help you finalize the amount of money or duration of your investment. So when you are creating the investment pan, it is also crucial to consider what is the end objective of your savings. This is often helpful in creating the risk-reward balance and assessing the return on investment over a certain period. These parameters are crucial and go on to maximize the value of your investment.
6. Diversification Is Crucial: I am sure when you are considering how to invest your money; everyone has suggested that you must spread out your positions. From bonds to stocks to mutual funds, you must explore every investment opportunity and allocate some amount of capital in it. This will make sure that you are never impacted too severely, in case a particular asset class hits a rough patch. The law of averages will always make sure that you score the home run.
7. Invest In The Index: Consider any point of time in the past. Be it the great depression or the IT boom; the Index has always delivered higher returns on a long-term basis. Even if you take a more recent period, the Index has emerged significantly higher after the Sub-prime Crisis and the economic meltdown compared to the Bull market that ended with it unraveling. So don’t forget to allocate a sufficient chunk of your investment in the Index.
8. Don’t Forget the Retirement Kitty: If you are eligible for employer match in your 401(k) then don’t let the opportunity pass by at all. Studies indicate that people often fail to identify this type of easy opportunities where your money grows unhindered and in a constructive way. The retirement kitty is by far one of the best known low-risk options which do not compromise on the rate of growth for your money. Make sure that you always contribute enough to receive the matching share from your employer.
9. Let Your Mind Rule Over Your Heart: We are often ruled by our emotions in many ways. But when it comes to your investment and your money, make sure that you let it be an absolute brain game. This is what will keep your money safe and let it grow as well. Euphoria and panic are hardly the adjectives that you must deal your investments with. Successful investment strategies are those that can help you optimize the value of your money in every possible way.
10. Don’t Mix Investment With Cash Reserve: You must understand that your investments are never the same as your cash reserves. Your cash reserve is the amount you keep aside for sudden expenses. It is never the same as your future savings. A lot of calculation goes into your future investments. You have to anticipate the kind of your future expenses and make allocations for them accordingly.
Conclusion
Therefore, when you are looking at effective investment strategies, it is imperative that you look at attaining the appropriate balance. The best investment strategies are the ones that can help you optimize the value of money and help your money grow effectively. So, follow the investment basics and always look at new ways to invest money to maximize the gains.
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