All leaders, whether they are working in politics, commerce or some other field, possess a single mindedness and determination to face and overcome whatever challenges may confront them. Perhaps this is also why they tend to make successful investors.
If you are new to investing, there are a number of important rules to remember before risking losing some or all of your hard-earned savings on schemes that promise much, but deliver little. As a leader you will already be aware that knowledge is power, so it is unlikely you would take a rash course of action without weighing up the pros and cons of each option. With that in mind, here are just a few tips on how to maximize the return on your investment, depending on how risk averse you are and whether your portfolio is designed with a short or long-term return in mind. Thanks to the internet there are a number of reputable websites that provide expert advice and information on how to become a successful investor and others that specialize in offering portfolio monitoring services.
The best way to minimize risk is to build up a portfolio of diverse products. Remember, you should aim to buy when a company’s stock value is perceived as being undervalued and then be prepared to wait, perhaps for up to ten years, before selling when its true value is recognized by the market. It is widely accepted that short-term speculating is considerably riskier than long-term.
Before proceeding further you need to decide if you are to be a “hands-on” investor or prefer to put your pot of money with a professional fund management company. Much depends on the amount of spare time you have to dedicate to monitoring your portfolio and keeping abreast of financial news and market fluctuations.
The precise make-up of your portfolio will depend on your personal circumstances; if you are looking to amass a nest egg for retirement, for example, you should be thinking in terms of a mix of low risk products that include a higher percentage of government bonds, annuities, mutual funds and stocks in blue chip companies. If you wish to be slightly more adventurous and are prepared to accept losses in return for the chance of making a potentially huge profit, it might be worth investing at least a small percentage of your savings in startups.
Your age is another factor to be taken into account. If you are in your 20s or 30s, it is well worth putting together a portfolio consisting of a high percentage of riskier products. As you move into your 40s and 50s the mix should be targeted towards stocks offering lower, but more reliable returns. In the final few years prior to retirement it is advisable to put your entire portfolio into ultra-safe blue-chip stocks, fixed interest bonds, money market mutual funds, annuities or government bonds.
Buying into startups, especially if they are operating in a sector in which you have an in-depth knowledge, can be extremely profitable; think about how much the original investors in companies such as Facebook, Microsoft and Apple made when they came to market. However, most experts agree that the percentage of your total fund invested in startups should be restricted to around 5%. It is also a good idea to invest in entrepreneurs who live within easy traveling distance as you are likely to be asked to provide expertise along with cash. What’s more, as a person who is accustomed to leading, you will surely want to keep tabs on precisely how your money is being spent.
When investing in the stock market, don’t forget that even the most advanced industrialized nations suffer from economic downturns; therefore, be prepared to consider investing in overseas markets. Investment trusts operating in the US can give you access to UK, Japanese, Far Eastern and European markets, along with those in emerging countries such as China, Brazil and India.
Establishing a complex and well-balanced portfolio may take many months; this is not a race, so take your time and thoroughly research each stock you are interested in before buying. It is also well worth bearing in mind that knowing when to sell is just as important as knowing when to buy. The best advice is that if a company’s stock value starts to fall, be ready to sell before the losses accumulate, and never hang on to poorly performing stocks for sentimental reasons. However, as a leader you will already be aware of such dangers.
One final thought; over a period of 30 or 40 years it is quite possible that portfolios consisting of only low-risk investments will equal or even outperform those packed with high-risk instruments.
This post is written by Aimee W.
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