Whether you follow all good health advice or not, you understand that it involves exercising, getting plenty of sleep, eating well, and drinking plenty. Well, the same principles are true when managing investments – you just have to follow a series of rules. With this in mind, we’ve gathered together seven tips to help beginners manage their investments.
Know Your Strategies and Goals
The first step to managing your investments is setting clear goals and working out a strategy, and then sticking to it. Having a goal will help you to decide where to spread your assets, how to organize your portfolio, and when to sell up. To help you come up with a goal, answer these questions:
- When do you need access to your money?
- What are you saving for?
- Do you need anything to achieve your goals?
Having this information will help you to build an investment strategy, which will vary depending on your goals. For example, if you’re saving to buy new care (short-term), your strategy will involve low-risk investments.
To have a successful investment portfolio, you’ll need to allocate your assets, which is simply deciding on which markets to spread your investments. Having investments in different markets will mitigate the impact of detrimental market changes.
Your overall goals, timeline, risk tolerance, and age will all play a part in choosing where to allocate assets. For example, how much of your portfolio will be tied up in equity vs. fixed income? Remember, priorities change over time and your goals may shift, which will mean having to revisit asset allocation.
Rebalancing Your Portfolio
All markets are on the move constantly, and your investments will fluctuate in unison, which can steer you off track to meeting your goal. The idea behind rebalancing a portfolio is the movement of assets from one market to another. For example, the stock market may be entering a bear market, and so you move your assets from stocks to equity funds.
Circling back to the healthy living analogy. Part of a balanced diet means eating different varieties of food, which help to make your body stronger. The same goes for your investment portfolio – you need to invest in many different assets to gain strength. Simply put, you need to avoid having all of your eggs in the same basket. Fortunately, there are plenty of online tools that will help you find assets with potential.
Get to Know Digital Tools and Resources
The marvels of technology have helped to simplify investment management, and anyone can easily access various tools. For example, you can monitor your investments using portfolio management software. Additionally, to help calculate potential earnings for your investments, you can use this suite of finance calculators, which will help you figure out dividend yields, compound interest, market cap, and much more.
Market movement takes place all the time, and you can’t be there to watch it in person every second of the day. Therefore, investment platforms have tools in place to help manage risk. For example, you can place a stop-loss order on your investment, which will automatically withdraw your investment once a certain low value has been hit. Additionally, to avoid losing profit, you can quit while you’re ahead by activating a take-profit order.
Managing your investment portfolio will take some getting used to, but it will become second nature once you’ve picked up the good habits outlined above. Always start with a clear goal, divide your assets, and then diversify your portfolio. To avoid risks, use stop-loss and take-profit orders and rebalance your investments regularly.