A successful investor maximizes gain and minimizes loss. He/She act when everyone is watching and follow some techniques so as to make his investment fruitful. I am going to share with you some of the insights a successful investors looks in order to always be profitable.
Put simply, compounding means earning interest on your interest and its interest and so on put this concept in investment and its earnings. The longer you allow your money to work for you, the more exciting the numbers get. Let us take an example, an investment of $20,000 at monthly compounding at the annual rate of 8% with monthly injection of $500. In 5 years, assuming no withdrawals, your investment would grow to $66,780. In 15 years, it might grow to $240,311 this shows the power of compounding.
This simple example also assumes that no taxes are paid along the way, so all money stays invested. While you ought to review your portfolio on a daily basis, the purpose is that cash left alone in an investment offers the potential of a big return over time.
Don’t Worry About Short-Term Pain Plan For Long-Term Gain:
Riding out market volatility sounds tempting as this can give immense benefit in the short period of time, doesn’t it? But what if you’ve invested $20,000 within the stock exchange at this volatile market you might have lost more than you earned with the fast-moving volatile market.
One cannot deny about the volatility of the marketplace. You should always consider two things while you are in the market. First, the longer you stick with a diversified portfolio of investments, the more likely you’re to scale back your risk and improve your opportunities for gain. Though past performance doesn’t guarantee future results, the long-term direction of the stock exchange has historically been up. Take your time and plan a longer time frame while you enter the market with your savings which is very easing and causes less stress about the market.
Watch out for the market trends in the longer time horizon to know and plan about the future investment as there are times when some markets are more volatile than other in particular period of times say for example in the current times stocks related to tourism industry and Tech industry are volatile than any other industry.
Diversification Is The Key:
Diversification means the process by which you spread your money over several categories of asset classes. The common asset classes are that are existent and easy to get into are stocks, bonds, and market funds. There are many subcategories of these categories which are existent which I will not be listing here as this will make it very long .
The reasons for asset allocation becoming the key is due to diversification of your portfolio you can own and hold various of class of assets which might limit your potential to gain but also mitigates the risk of loss that may be devastating if one sector where your investment is crashed.
Do Not Buy & Forget:
Periodic review of the portfolio has always believed to be beneficial for long term growth. This is due to the same volatility of the market which reacts not only to supply and demand as stated by many famous persons but also with the external environment which are not in the control of individual which is called the macro economic factors. I am not going in depth with macro-economic concept as this is readily available in google with a click of button.
When you have diversified portfolio it consist of different assets which has different percentage returns periodically reviewing your portfolio gives you the idea about the economic condition and the percentage returns of different types of your portfolio where you can reshuffle them as per the market performance.
This is very essential to review your portfolio periodically as per me I review my portfolio semi-annually for traditional assets class and for modern assets class and fast moving markets the periodic review process is every 3 months for my mid-term investment which extends up-to maximum of 3 years. For Longer term portfolios I perform the periodic review once every year.
Disclaimer: As always I am sharing my strategy and techniques please do your research and this is not financial advice.
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