Investing demands that we bring our best qualities to the table. It takes a unique mixture of social savvy, math and nerves of steel, as well as an inquisitive mind willing to look beyond the low hanging fruit, in order to make major profits. Below are the three major components to a successful investing strategy, the rest can be distilled from their overarching lessons.
1. Understand the risk involved.
First and foremost, understanding risk is essential. You cannot hope to achieve success in the stock, real estate or even fine art market without evaluating both your risk tolerance and the relative weakness of any position you are considering. Investments come in an amazing variety, but all carry inherent risks. Any instrument of value may fetch a tenfold increase when you decide to move on, but it also might end with a major loss of value and therefore profit. You just can’t be sure.
Depending on your purpose, you may choose to invest in high risk commodities for all the types of investments you pursue, or you might look for something that takes simple maintenance and comes with a high probability of minimum but constant returns – like a Blackrock ETF or a mutual fund. High risk usually means a higher rate of return, and has remained the best way to electrify your portfolio for years. However, when you decide to go for high risk investments there is a far greater chance to go bust without a liquid reserve and passive income to supplement the stretch for greater profits. Evaluating risk tolerance upfront and then doing your own due diligence on the investment property, particular shares in the stock market or other financial product will set you up for success in the long term.
2. Estimate your return on investment.
After evaluating risk, you must get a handle on the annual returns to be expected. This is important, both in terms of budgeting and long-run portfolio building, but also helps you define shorter term targets to hit. Some of the biggest names in the stock market rebalance their holdings quarterly, so this may be a good starting place for your own portfolio in order to ensure that you are meeting or exceeding targets.
Considering your ROI is an important step toward success because it also forces you to take into account the debts relating to your investments. Many investors separate investment property loans or leveraged capital from their main thrust of cash, but this is a mistake. Understanding your portfolio in its entirety is the only way to fully understand your growth potential and reality as one cohesive unit. By looking at the full picture it may become clear that you are on the right track, or that your REIT investments, rental properties or credit union savings account are chronically underperforming. If you are suffering from a depressed income ratio then investigating alternative investment opportunities may be in order. A Yieldstreet review of alternatives to brick and mortar investment properties, bonds, and stocks can get you inspired again and provide crucial information for anyone interested in alternative investment options.
3. Keep your cool.
The final thing you must do is to keep your cool. Buying commodities can be more than a little stressful as you watch your potential return rise and fall. This is particularly problematic in the stock market, with up to the minute pricing changes. The best thing you can do is tune out the anxiety. If you aren’t actively trading a stock or hard commodity then don’t check in on your assets without good reason. The best investors have faith that their decisions are based on sound logic and are likely to increase in value. If you’ve considered the risk and reward, then you should believe in your process, too. No one can be perfect, but if you always stick to your strategy then you will likely win more often than not and build value within your holdings. Don’t fret about daily changes, the real money is in the long term.
Check out Yieldstreet reviews for alternative investment options to get yourself inspired while holding other traditional assets that provide solid, middle-range returns. And most importantly, create a strategy that works for you and never waver on the three Rs: Risk, Reward, Relax.
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