High fees. Derivatives that will take away your profit.
You have to be savvy to make sure your investments will give you the most possible for your dollar. And with the roller coaster of an economy we’re living in, you may be worried and asking yourself: How can I boost my stock portfolio?
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But as you begin sifting through the hundreds of possible stock options, don’t get overwhelmed. Here are five tips that will help you boost your stock portfolio.
1. Choose equities over bonds. If you have a choice, take advantage of this general rule taken from decades of trend analysis: Equities perform better in the long run. While equities tend to be more volatile than bonds, the payoff can be worth it — if you have the stomach to weather the stress. To ease your anxiety, a combination of bonds and equities are best.
2. Pluck stocks from many industries. Consider natural disasters. Oil spills. Taxes on fast food. Don’t put all of your money in one industry because if that sector takes a hit, there goes all of your savings, and maybe your retirement too. As a general rule, a well-balanced portfolio has stocks from at least seven industries.
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3. The growth rate is the most important. While a low valuation is key, the most important aspect of a stock to look for when deciding where you should invest is the growth rate. The higher the better, but also make sure the stock is consistent. There should be an upward tick that has been higher-than-average for quite some time. But beware that high-growth stocks can tend to be overvalued. Make sure not to get intoxicated by these unappealing options.
4. Research the companies before you buy. Take advantage of the financial disclosures and public relations releases that a corporation puts out before you decide to become an investor. Corporations have recently increased their communication with their shareholders and potential investors to create a sense of ease. But these releases can provide you insight into the health of the company. Look for stability and consistency. Erratic behavior and decisions are a red flag. Check out the company’s balance sheet to make sure there is still enough to weather any potential financial storm.
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5. Don’t be afraid to sell. Trust your gut and stay in touch with the market. Disregard the blips but if an investment is slipping fast, know that it’s okay to get out. It’s called playing the stock market for a reason. Sometimes you win. Sometimes you lose. If you play it right (by picking moderate options) you will cut your losses and increase your gains. And remember, don’t beat yourself up if you made the wrong decision.
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