Investing is more than purchasing stocks and seeing your assets appreciate. Without a strategy, you will be lost and only focus on short-term gains. However, it would help if you had a long-term horizon for investing. Typically, this horizon spans from 10 to 30 or more years. You can adjust your strategy and risk profile during this period according to your taste. To understand how you can grow your portfolio, we put together three recommendations from professional investors.
1. Create a strategy based on multiple portfolios
Investing is buying stocks and diversifying them across industries and markets. As a result, you minimize risk and can capture growth across the globe. Typically, investors make a distinction between stocks that are established and emerging. With specified, we refer to companies such as Coca-Cola and HSBC: large organizations paying dividends to shareholders. On the other hand, we have new players and smaller companies with higher upside potential but do not yet pay dividends. By combining these into multiple portfolios, you can create a winning strategy.
2. Take advantage of tech tools for investing
There was a time when becoming a successful investor required decades of experience in the finance field and access to vast libraries of books. Thankfully, things are now simpler, which is one of the primary reasons the barriers to entry have been lowered so much. Tech tools have revolutionized the way people invest and manage their portfolios, and not considering them means limiting yourself.
Why should you invest in them? Well, not only are they more accurate and give you access to information that would typically require a long time to access manually, but they can also help you identify new trading opportunities.
Technology has come a long way in the past decade and, thanks to innovations like AI and machine learning, you can access millions of data points and conduct a thorough technical analysis before you begin trading. These technical analysis tools can be included by default in trading platforms, but experienced brokers often use standalone tools to get a more comprehensive view of potential investment opportunities.
As every investor knows, emotion can be a problematic factor. It can prevent you from taking advantage of a great opportunity because you’re afraid of losing, and it can make you make rash decisions just for the sake of pursuing the thrill. Investing tools can reduce the impact of emotions, removing them from your trading decisions. Of course, any investment strategy will also require a human touch at some point, but, in the beginning, technical analysis tools can save you from making many rookie mistakes based on emotion.
In addition to technical analysis tools, other tools that you can use include automated trading systems. This way, you don’t have to allocate as much time to trading, and you can watch your portfolio grow as you sit back and relax.
Investing tools can also help by boosting your education. For example, you can use apps that offer investment insights and keep you up to date with the latest news and stock options.
3. Allocate per risk appetite
One of the golden rules of investing is that you should never do anything that exceeds your risk appetite – that is, the amount of money you’re willing to lose. Depending on your risk appetite, you can allocate funds to various portfolios. For example, you can place 70% in established companies that pay dividends and give the remaining 30% to different industries that are emerging, and you believe in. No matter what you choose, make sure you understand the implications of your decisions, and you establish your risk appetite based on a realistic outlook of your finances.
4. Set your KPIs
With a particular risk should come a specific reward. The more risk you take, the more you should be rewarded. Therefore, you should set Key Performance Indicators (KPIs) for your portfolios depending on risk level. This helps you see if your portfolios are on track and where you should adjust. KPIs can be difficult to calculate manually, which is why it’s a good idea to use a KPI calculator, which keeps track of them for you. This way, you can analyze everything from your dashboard and make decisions based on complex data, not emotions and suppositions.
5. Dollar Cost Averaging (DCA) to spread risk
Creating your portfolios according to your strategy does not mean you should invest your funds’ lump sum. Timing the market can be complex, and therefore it is recommended to spread your purchases over time. An approach that is often mentioned is Dollar Cost Averaging (DCA). This means you apply your investment over time and buy portions on a period basis (e.g., weekly or monthly). This helps you to minimize your exposure to market volatility.
6. Leverage a stock tracker
A stock tracker is an application that allows you to have an overview of all your holdings. This enables you to have real-time insights into your assets and combines this with news and analysis of the stocks. Next, you can create portfolios and allocate your stocks to them. This is something that most brokers do not offer. However, it can be a crucial element if you want to track your progress across your portfolios and adjust where needed.
7. Combining stocks and cryptos
One of the most emotional debates among investors is whether you should trust stocks or crypto more. Usually, fans of stocks tend to be more conservative, while crypto supporters have a penchant for innovative technologies and alternative investments. But why not both? Combining stocks with crypto is a great way to diversify your portfolio. There are also stock tracker applications out there that combine stocks with cryptos. If you are active in the crypto domain, you can have a holistic view across the board. Want to learn more about these offerings? You can visit https://delta.app/en, a leading provider of such a tracker.
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