Choosing your investments is the first step to building a successful portfolio. The next step is to monitor your investments to make sure they are performing well and progressing toward your goals. Assuming your investments have performed well, you should expect your portfolio value to increase over time. Of course, your investments may also lose value.
To make your investments more profitable, diversify your portfolio. As Nobel Prize winner Harry Markowitz pointed out, diversifying your portfolio is the only “free lunch in finance.” By diversifying your investments, you can boost your returns significantly. If you had invested $100 in 1970 in the S&P 500, your investment would have grown to $7,771 in only four years.
The first step in successful investing is to determine your goals and your tolerance for risk. This can be done on your own or with the help of a financial advisor. By learning the different types of investments and using your knowledge to make the most of them, you can build a diversified portfolio that will provide you with financial security in the long run.
When choosing your investments, keep in mind that the risk is higher with the more volatile asset classes. If you can’t afford to take this risk, you may want to invest in lower-risk assets such as bonds or mutual funds. If you don’t have a lot of time to devote to your portfolio, consider investing in robo-advisors or other hands-off investment methods.