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9 Key Things to Remember When Managing Your Investment Portfolio 

By Mich

growing your moneyIt is always a good idea to keep your eye on the ball when it comes to managing your portfolio as your investment priorities can easily evolve over time and markets change too, meaning you might have to move your money around to spread the risk.

Here is a look at some of the main things to remember about managing your investment portfolio, including why it helps to stick to what you know, a look at risk profiles, and some pointers on fees and other issues that you need to be aware of.

Have a good understanding of what you have

As part of your commitment to good Financial management it is essential that you have a firm grip on what type of investments you have in your portfolio and what each product is designed to achieve.

A balanced portfolio that spreads your risk across a range of investments is often considered a good strategy, which means having a certain percentage of your money in bonds, gold, stocks, etc, rather than in one type of investment.

Diversification is good

A balanced portfolio involves diversification and the reason why this approach works is because it doesn’t leave you too exposed in one sector.

For example, if you had all your money invested in gold and the price crashed that would not be a good scenario.

Always aim to stay diversified across a range of asset classes.

Try to take a considered approach

It is easy to get carried away in the excitement of a new investment opportunity and sometimes it pays to get in early, especially if the value rises shortly afterward.

However, the best strategy, in the long run, is to take a more conservative approach and give yourself time to check out all the angles and information you have to hand regarding a potential new investment idea.

Do your research and run your ideas by someone else you trusted, such as an investment professional, so that you can reduce your risk of rushing in and regretting it.

Returns and risk are inextricably linked

It is always worth remembering that chasing higher returns on your investments will invariably involve a larger element of risk to your cash.

Investing in more volatile or lightly regulated stocks or financial products carries a risk-reward balance that you need to be fully aware of before you commit your cash.

We all have different levels of risk tolerance too, and it often pays to align your investments with how cautious or adventurous you are prepared to be with your money.

Cash is king

You want your money to work hard for you and earn a reasonable return but there is a lot to be said for having some of your money held in cash.

Having cash gives you the freedom to make investment decisions quickly if appropriate and it gives you the comfort of knowing you can deal with a financial emergency if you need to find some money in a hurry.

Set targets

It is always advisable to have some future financial goals in mind when developing your investment strategy.

For many of us, the driving force behind our investment decisions is to have enough money in retirement.

If this is what you are saving for it should form the basis of your investment strategy and it is a good idea to check whether your plans are on track on a regular basis.

Retirement planning is a long-term plan and there are often decent tax incentives that you can take advantage of in order to boost your retirement pot.

Having goals should provide you with the right motivation to manage your investments closely and proactively.

Think about a safety margin

What you don’t want to contemplate is the prospect of your investments turning sour and losing rather than gaining value.

Investing is a not a one-way ticket to riches and savvy investors tend to try and adopt a cautious and realistic approach to each opportunity.

If you are conservative with your estimation of future growth prospects this will help you manage expectations and should instill a sense of discipline in terms of waiting for the right moment to invest in order to try and limit the downside.

Focus on underlying performance

Many experienced investors will probably confirm that it is best not to be dazzled by the stock price and, instead, focus on the underlying performance.

It often pays to not get emotionally attached to the stock price falling or rising over a short period of time. The smart approach is more about whether the fundamentals of the stock are right, meaning that you might get your investment reward, but over a longer period of time.

Be fully aware of costs

When you put your cash into investment products, buy a stock, or even buy some gold bullion, each and every transaction will almost certainly involve a financial cost to yourself above the amount you are investing.

Regularly trading stocks can have a big impact on your returns as the commission and administration fees you pay with each transaction will potentially diminish your returns.

Investment products and funds are run by managers and the companies behind them will charge an annual fee for managing your money and investing it on your behalf.

Try to avoid too many stocks over a short period of time as these trading costs can soon add up, also, shop around for the best deals if you are buying investment products, as even apparently small fees can accumulate and become a sort of stealth tax that can impair your financial return.

If you want to give yourself a shot at achieving the best possible returns on your investments it pays to have a plan and some defined financial goals.

Once you know where you are heading with your money, what you want to achieve, and what timescale you need to work to, you can manage your investment portfolio with a greater degree of authority and control.

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Filed Under: Investing

About Mich

Mich is your typical middle class guy with a house and 2 kids minus the dog. He works in the IT industry and likes to muse about how to achieve more for less when it comes to money.

About Invest It Wisely

Invest It Wisely is about evaluating the choices that each of us face everyday. It’s about investing your time, your money, and your energy wisely, in order to achieve your goals. The end goal is maximizing your life expectation, and exploring the ways to get there.

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