Some people choose to invest their money in one specific type of investment. While convenient, this method of investing has its risks. Investment earnings fluctuate, and placing all your money in one type of investment can result in losing your life's savings or a large percentage of your money. Rather than remain faithful to one type of investment, allocate your assets across different portfolios to help maximize your earnings.
1. Determine your time horizon. Some investment portfolios are better suited for long-term investors who will not tap into their investment accounts before retirement. Investors who need to tap into their accounts before retiring might choose portfolios that offer quick returns, such as a high-rate savings account. If you have 30 years until retirement, you can invest more aggressively than if you only have five years to go.
2. Evaluate your risk tolerance. Some investment strategies are riskier than others and the value of these portfolios can fluctuate over the years. For this reason, an investor near the age of retirement might allocate assets between safe portfolios such as bonds and certificates of deposit to avoid losing his investment, as opposed to a younger investor who can afford to take some risks in investments such as stocks.
3. Define your goals and determine what you hope to achieve by allocating your assets in different portfolios. For example, do you need money for a down payment on a house? Are you preparing for retirement? Do you want to increase your personal savings? Your goals will play a large role in how you allocate your investments.
4. Purchase stock if you're a long-term investor. Pay attention to market reports and research companies, and then pick a company or companies in which to invest. Contact a stockbroker or open an account with an online brokerage firm, such as E*Trade. Make your initial deposit and purchase the desired number of shares.
5. Invest in bonds if you're a low-risk investor or if you are closer to retirement. Talk to your bank or a brokerage firm about purchasing a government bond. By purchasing a bond, you agree to lend a specific amount to the government. The agency that issues the bond then agrees to pay you a specific amount of interest on a semi-annual basis. If you are older, you typically want to have more of your investments in bonds than if you are younger.
6. Diversify with mutual funds. Banks and brokerage firms offer mutual funds, and some employers allow employees to invest in mutual funds through the company. Mutual funds basically pool money from different investors, and a broker or funds manager then invests these funds in various types of stocks and bonds. As an investor, you own a share of the funds.
7. Keep money in a high-interest savings account to safely allocate assets. Savings accounts represent a type of portfolio. Talk to your bank to see how you can get the most from your savings account. Bank advisers can provide information on high-yield savings accounts available to you. Compare the rate offered by your bank with rates offered by other banks, including online banks. Savings accounts are best for short-term invests that you plan to tap soon, such as a down payment on a house.
8. Rebalance your portfolio. Meet with your brokerage firm at least once a year to monitor your investment portfolios. If one investment portfolio performs poorly and you begin to lose money, rebalance or readjust your portfolio to keep your investment strategy on track.
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