Strategies to improve your portfolio and aim for long-term growth
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Growth: a magic word that has been intertwined with organizations since their inception. Growth is what fuels our economies, and what can lead to yield on your investments. What people tend to forget is the fact that growth is not always the right thing. For example, some sectors in the economy need to decline for others to emerge. This is important to note, especially if you are interested in investing yourself. In this article, we will highlight some of the strategies that set you up for long-term growth.
Diversification of your portfolio
As became evident in the introduction, growing your portfolio means betting on many horses. It is best to bet on all horses. At least, when looking at the long-term returns of the markets. For example, it is very hard to beat the steady return of the S&P 500 index when comparing individual stocks. Therefore, traders who have limited time and/or knowledge are best served when looking at these indices instead of investing in single stocks.
Growth or high yield stocks?
If you do want to invest in single stocks, we recommend doing this with only a portion of your portfolio. For example, if you know a specific niche, you can leverage this to spot opportunities and buy growth stocks. On the other hand, you can decide to move ahead with blue-chip companies and focus on the yield they bring home. Some of these companies offer a high yield, making it attractive to hold their stock in the long term.
Leverage a portfolio tracker to stay on course
The difficulty with owning single stocks is the exposure you have to them. For example, the sentiment regarding a stock can change, causing it to drop significantly. This holds for earning reports as well as the sentiment of the industry. If you do pursue the purchase of stocks of companies, you are best equipped with a portfolio tracker.
What does a portfolio tracker do?
A portfolio tracker can integrate with the brokers you use, allowing you to have an overview of your assets. These are updated in real-time, and automatically updated when you are using index funds that compound. Next to that, they offer information on the market and can send push notifications based on price changes and market events. This allows you to limit the tracking of your portfolio yourself, limiting the chance you are persuaded to day trade. Delta is a good example of such a tracker. They offer a wide range of functionalities and also allows you to track cryptocurrencies.
Generally speaking, it does not matter what your goal is for investing to stick to this principle. When you invest continuously, you are likely to reap the benefits in the long term. You spread your purchasing price, known as the Dollar-Cost-Averaging (DCA) strategy. To effectively use this strategy, calculate the Saving Rate (SR) you can achieve based on your income. For example, if you can save 30% of your income every month, you can invest this amount in the index funds you have selected. This will ensure continuity and allows you to compound, limiting your exposure to market corrections.