Maintaining a successful investment portfolio can be like rocket science for, well, probably 95% of the population. There's no need to mince the percentages; the blunt truth is that most people have no clue how to invest and would still have just as many questions even after reading a dummies guide on investment. This is in no way a putdown of the average layman; it’s merely a statement affirming the intricate complexities of investing and giving, which forces investment experts to become proficient through firsthand experience and countless trials and errors.
For those just starting to get their feet wet, there are some basic guidelines that they can use – or impart to their advisor – to keep their portfolio on a profitable course.
Have a Mental Process for Selling Stock
If you own stock, selling can often be mentally tougher than buying because there is an emotional investment that goes with selling. The key is to form your own set of principles to use as a blueprint for deciding when to sell. A solid sell methodology can help maximize larger gains, soften the impact of big hits and mitigate costly turnovers. The reason it pays to have a selling strategy is because you make your decisions based on strategy rather than making impulsive moves motivated by fear, greed or ego.
Know When to Cut Your Losses
Do you know how most people blow their savings at a casino? They lose a bit at first, but instead of cutting their losses, they continue to test their luck – or rather lack of it – in the hopes of gaining back what they loss and hopefully earning a little extra in the process. Just as with placing wagers in a casino, you need to know when to cut your losses when investing. The best way to do this is to come up with a stop-loss. This is a predetermined price where you decide to sell. It is recommended that you establish a stop-loss for each of your investments. With specific stop-loss instructions, your broker will know when to sell if an investment dips to a pre-set dollar amount or percentage.
Don’t Put all Your Eggs in One Basket
Diversify your investments by investing in a wide range of asset classes. This will help you reap the maximum benefits when there are market upswings and lessen the blow when there are dips. Consider the following investment options for your portfolio:
• Real Estate
• International Investments
Diversifying is a time-tested method of balancing risk and return. By distributing your eggs in multiple baskets, a drastic dip in one basket won’t mean instant catastrophe. In fact, in some circumstances, a drop in one investment may mean a rise in another. Stock prices for instance, often go up when bond prices drop, and vice versa.
Properly Allocate Your Assets
How you allocate your assets will likely depend on your age and how close you are to retirement. Younger investors tend to have a higher risk tolerance and therefore more likely to invest more heavily in stocks, which carry the potential for higher returns. Older folks may opt to invest more in cash and bonds, which are more stable. However you choose to allocate your assets in the beginning, it will likely change and undergo multiple overhauls.
Within your stocks, you can further diversify through the following methods:
• Invest in multiple sectors
• Opt for both active and passively managed funds
• Distribute your dollars across small, medium and large-cap funds
• Put a portion of your money in both value stock and growth funds
With some digital assistance, it’s possible to take some of the guesswork out of the meticulous micro-analyzing. There are investment portfolio management services that make your job a smidge easier. Consider the following companies that all investors from amateur traders to professional advisors should explore in depth:
Macroaxis – Macroaxis is a cloud financial management system that utilizes a state-of-the-art framework and portfolio optimization engine to help investors of all levels develop a portfolio that outperforms market benchmarks. With Macroaxis, traders can detect stock patterns, identify trend reversals and factor in the competition. What this does is maximize potential for long-term returns while cutting down on exposure to market risks.
Stock Market Eye – This all-in-one software makes it simple to keep tabs of your investment accounts in one place. This enables users to monitor all of their investment positions, analyze gains and losses, as well as track stocks, mutual funds, currencies and ETFs. Stock Market Eye was developed by an indie software developer with the purpose of helping individual investors make educated decisions by importing their files directly to the system and creating their own watchlists.
StatPro – This portfolio analytics service has been around since 1994 and to date has served over 450 clients across 37 countries. Each of the company’s 250 plus staff members represents the best in analyzing and deciphering market trends. StatPro’s cloud-based service has met the rigorous standards put forth by the Global Investment Performance Standards and aids investors in their asset management endeavors.
Investing can be a dicey journey with big payoffs and tremendous losses. However, it is far from a game of chance. While you’re not going to maximize your profits 100% of the time, through analysis, hunch and even crossing your fingers, your odds of more profitable gains will stack in your favor.