Building a ‘Savvy Investment Portfolio’ takes time and good investors always form a habit to work on it consistently. When it comes to better investing, a savvy investor will always consider the key risks associated with such investment.
As it happens, the Universal Law of investment – ‘Higher the Risk, Higher the Return’ suggests that risk and returns go hand-in-hand. So while you can’t earn higher returns without taking some risk, a better investor always understands the importance of reducing the degree of risk that his investment portfolio might be exposed to.
So yes! You’re thinking it right – ‘Reducing your risk while maximizing your returns’ is the key idea to becoming a better investor. And doing so requires these timeless ideas:
A well-diversified portfolio is the key to reducing your investment risk. When some of your investments are struggling to perform, other assets should be performing well, mitigating the losses from the former. You can continuously diversify your portfolio within a single-asset class as well as have multiple asset classes within your portfolios such as stocks, bonds, and other assets.
Chasing performance right after investing is one of the biggest mistakes that millennials make. Always think and re-think before making an investment. Take various aspects and key risks into consideration and always ask questions about the investment decision that you’re going to make. But once you’ve done your research, invest and be patient! Checking and re-checking your portfolio performance won’t help. Just keep track if things are going in the right direction and if they are, you should only think of rebalancing your portfolio after giving a good amount of time for your asset to perform.
Making the right investment decision is one thing but when it comes to deploying your funds, you should make your investments in a phased manner spread over a period of time. Remember that averaging your investments helps you bring down your average investment cost while allowing you to review the performance in between.
So start your investment journey today. But remember to do it strategically and regularly!