Individuals want to do more than receive income from their investment portfolios. They also wish to grow the value of this portfolio. There are several ways to accomplish this goal depending on factors such as the investor’s financial goals, risk tolerance, and preferred types of investments. Some strategies come with more risk, but there are tried-and-true methods every person may use to grow their investment portfolio.
What is Growth?
A person may define growth in several ways. Some individuals consider any increase in the value of their investment account to be growth. However, most people refer to capital appreciation, where their investment increases in price or value over time. While this growth may occur quickly, it comes with a higher risk. How can a person achieve long-term growth? What strategies should they use?
Buy and Hold
People use buy-and-hold for improving your investment strategy. Men and women with several years to invest before they need the funds often use this technique. They purchase stocks and other investments and hold them with only minor changes for an extended period. These investors never worry about short-term price movements or technical indicators.
Timing the Market
Day traders and others who follow the markets closely may try to time the market. They buy when low and sell when high, which allows them to yield higher returns. However, they must be able to gauge the market entry and exit points correctly. Failing to do so properly can lead to significant losses. Investors need more time to watch the market this closely or the trading experience to know when to buy and sell successfully. Doing so requires real-time data that is relevant to their investments. For these reasons, financial experts recommend most people avoid this strategy.
Diversify the Portfolio
Individuals who use the buy-and-hold strategy also benefit from portfolio diversification. By diversifying, they can reduce or eliminate risks associated with investing. They choose different types and classes of assets, so if one class or asset drops in value, another will likely increase. This strategy significantly minimizes the risk of their investment portfolio reaching zero. Asset allocation considerably improves investment return over the long term. The portfolio will grow with less risk when a person chooses the right mixture of stocks, bonds, and cash.
Growth Sectors
Investors should research the economy and learn which sectors are aggressively growing. Healthcare and technology are two sectors that typically offer above-average returns. Investors will take on greater risk and volatility, but they can hold on to these stocks for extended periods and carefully select their investments to reduce this risk. Many investors work with an advisor to help grow their portfolio’s value. They must choose this investor carefully to ensure they get accurate and relevant information.
Dollar-Cost Averaging
Investors in mutual funds often turn to dollar cost averaging. They set aside a specific amount to purchase shares of specific funds regularly, and the fund’s net asset value will vary with the market. Investors will buy fewer shares when the fund price increases and additional shares when it drops, allowing them to see a more significant gain from their purchases over time. There is no need to try to time the market.
Investors find multiple strategies for growing their investment money. Simple techniques are best for new investors. As they gain experience, they may wish to consider more sophisticated methods. When doing so, they should work with a financial professional who can guide them in making the right choices for their financial needs.
