The basis of a great investment strategy
For your investments to perform well over the long-term, you need to build up a core holding of great stocks in your portfolio.
These stocks will help to dampen the risk you take on when you invest in more risky assets, without taking the reward away. It’s an investment strategy that works well.
To put it another way, you want to build a solid foundation of stocks, which can then add in some extra risk by investing in riskier assets like penny stocks.
Diversification is an essential aspect of investing
This solid foundation of stocks should be well diversified across different sectors. Good dividend paying stocks should also be included here.
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You can also lower your risk by investing in different types of assets, such as property
, bonds, cash and precious metals.
It all comes down to asset allocation.
You can take steps to boost the performance of your portfolio, such as reinvest any dividends you receive. This increases your holdings in your dividend stocks and increases your future pay outs as you’ll be in line for more dividends as you will have larger holdings.
Then periodically you need to rebalance your portfolio. This means selling your expensive assets and putting this cash into cheaper assets. This encourages you to buy low and sell high.
According to your risk tolerance, you need to decide how much you should hold in each asset class. By sticking to this over the years, you’ll see your wealth grow.
So there you have it. The key aspects you should include in your investment strategy.
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