Did you know that 60% of Americans are concerned they won’t be able to retire when they hit 65? Don’t worry — if you’re a new investor, you can chart a financial path that gives you the cushion you need. But you’ll need to be proactive and savvy with where you put your money.
Read on to learn 7 important portfolio management tips for beginner investors!
1. Set Financial Goals
When it comes to portfolio management tips, the first one is to think about your goals. Are you hoping to save for early retirement at 60? Or are you trying to grow funds for kids or a new home?
How quickly you need access to money, or how quickly you want to grow it, can determine your investment strategy. If your employer has a retirement investing program, especially one with a match, take advantage of it. This can be where you add money that goes toward long-term retirement goals.
You can set up a brokerage account where you can add money that is more accessible. You’ll stand to gain a better percentage of return each year versus what you would get with a traditional savings account. And if you need the money for a car or appliance, you can get to it quickly.
2. Do Your Homework on Options
Before you start selecting items from a menu of assets, know what you’re getting into. Understand that equities are stocks, whereas bonds are fixed-income assets. Read about historic performances of different assets that catch your eye.
Do you have a passion for the environment? Consider investing in greener companies to ensure you’re making financial decisions that reflect your values.
Consider global supply chain issues, too, as you look at international stocks and other options. With supply chain disruptions, some industries may lag behind in production, and that could hurt your investments.
3. Understand How Much Risk You Can Handle
Typically, you’ll pull back the level of risk as you age. For instance, as a 30-year-old investor, you may put 70% of your money into stocks and 30% into bonds. But when you’re 40, you might scale back to 60% of your money in stocks.
Take stock of how much money you have, as well as how old you are. If you’re jumping into the investment game a little later, you might want to err on the side of risk.
But if you know you’ll need money for a down payment on a house in the coming year, you may want to be more cautious. And remember that it’s smart to reserve some funds in a savings account for emergency needs.
4. Choose Your Mix of Assets
Investment portfolio management includes determining where you want to put your money. Avoid putting a hefty percentage of your money into a single stock. Your better choice is to aim for a diverse mix of assets that can withstand difficult times.
Turn to a blend that includes bonds, equities, and precious metals. Bonds tend to perform better when equities are underperforming. In other words, they can stabilize your portfolio.
Metals, like gold, provide another reliable and stable asset. Equities can be more volatile, so include some companies that are new, promising, and potentially lucrative. These would be housed under small-cap funds.
At the same time, it’s wise to put money into more established companies that are less risky but more stable. These would be mid-cap or large-cap funds.
5. Invest Money Each Month
After you’ve selected the funds where you want to put your money, you can start investing! Ideally, investing is not something you’ll do once. If you can get into the habit of budgeting money to invest each month or quarter, you’ll see better results.
And remember that you’ll have the advantage of compound interest with investing. This means you’ll be earning interest from the interest in addition to the initial investment. You’ll see even more money start to add up if you can siphon off some of your paycheck and add it to the pile each month!
6. Watch for Fees
If you’re investing with retirement in mind, be mindful of fees. If you buy and sell frequently, you’ll end up paying management fees with each transaction. Though they might seem small initially, they can add up and cut into your bottom line.
With mutual funds, watch for load fees. You may need to pay up to 5% as a commission when you purchase mutual funds. If possible, invest in mutual funds without load fees to avoid the cost.
Instead, invest for the long haul. Don’t panic and start selling when stocks start to tumble. Sit tight and ride the waves!
7. Revisit Your Portfolio
Once you’ve done your research and selected your funds, you might think you’re done. But you’re not. Yes, you should avoid making frequent sales and purchases as a new investor, but you also don’t want to be an absentee investor.
Successful portfolio management requires that you assess and rebalance your holdings from time to time. As you age, you may want to take a more conservative approach that favors bonds, for instance. Alternatively, if you’re looking for more risk, you could move a portion of your money into small-cap funds.
Find Portfolio Management Success
Portfolio management doesn’t have to be a daunting task if you’re strategic and methodical. Set goals, start early, and research the types of companies and assets where you want to put your money. Then make a point of revisiting your portfolio to make adjustments as needed, but keep your mindset on long-term performance.
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