Regardless of how well your investments have been doing as of late, it’s near to impossible to predict how the market will behave from one moment to the next, which is why a diversified investment portfolio is so important. Here are five tips to ensure that your portfolio is strong enough to weather any economic storm.
Firstly, it’s important to continue to add to the current investments to your portfolio on a regular basis. As a general rule, investing lump sums is not advisable. If you happen to have a large chunk of money which you want to invest, consider using pound to cost averaging. This is a method which can help to smooth out the ebb and flow caused by volatility in the marketplace; you invest your available capital on a regular basis, putting it into a specific investment portfolio of funds or stocks.
Spreading your capital is the best way to keep it safe during times of economic downturn; equities might be serving you well, but it’s never wise to place all of your investments in a single sector or stock. You can develop a mutual fund simply by investing in a few reliable and trustworthy companies with whom you are very familiar. Some might say that making investments in businesses which you know will leave you with a portfolio which is too retail-centred, but the fact is that your money is safer when you know who you’re dealing with.
It’s also wise to consider including bond or index funds in any diversified portfolio. Investments which are made in securities, which track a wide variety of indexes can make for a wonderfully diversified portfolio in the long term. Fixed income investments like this will provide your investment portfolio with further protection in times of uncertainty in the market.
It’s vital for an investor to know when to leave; pound to cost averaging, and buying and holding are all good investment strategies, but you should never ignore the current goings-on of the market, simply because you have automated many of your investments. It’s essential for any investor to keep their eyes and ears open in regards to the market conditions, and to know when to cut their losses and leave.
Lastly, it’s important to watch your commissions; if you are not a natural when it comes to trading, you should still make sure that you know what the fees you are paying are getting you. A number of brokerages will charge transactional fees, whilst others charge a fee per month. Be aware of how much you’re paying and whether it’s worth it when compared to how well your investment portfolio is being treated.