4 Ways to Increase Investment Returns
Ways to increase investment returns seem to be everywhere these days. Or, at least, tons of people everywhere seem to claim that they have the best way to help you increase your investment returns somehow. The thing is, not all investment options are equal, and if you really want to know about the different ways to increase investment returns it is always a great idea to take some time out of your day to read into it for a bit. Knowledge is power after all. So, get yourself some power right now, by reading this article on the 4 Ways to increase investment returns!
1. Lower your costs.
Ways to increase investment returns not always need to be all about increasing profits at the end. They can also be about keeping profits steady, but decreasing what you put into your investment, to begin with. The thing is, especially when you are making money with your investments, it can be easy to ignore your expenses that eat away at your profits – and they quickly add up.
Depending on the size of your investment, even reducing your cost by a tiny bit, maybe just 1%, can make a huge difference in how your investment portfolio performs over the long-term. But the best way to think about this maybe with an example. If you, say, earn an average of 10% on your portfolio every year, but pay 2% in different investment fees at the same time, then your net rate of return is actually just 8%. So, in this example, if you have a portfolio that is worth $100,000, it will increase to $466,097 in 20 years, assuming everything else stays equal.
Now if you apply ways to increase investment returns by cutting costs by 1%, then you will get 9% in returns every year instead of just 8%. So, instead of your portfolio of $100,000 increasing to $466,097 in 20 years, it will instead rise to $560,440. That is pretty much your entire initial investment, and it all comes out of just cutting your expenses by 1%. So, if you are looking for ways to increase investment returns, then start by cutting your cost – even a tiny bit can make a massive difference!
2. Diversify your portfolio.
When it comes to ways to increase investment returns, then the importance of a diversified portfolio is something most investors are hyper-aware of. But the thing is, once you are running your investments during a bull market, even this simple principle can be easy to forget about. After all, if you have stocks that are performing great right now, why should you change anything? This is exactly the train of thought that many investors follow, whether consciously or unconsciously.
And then, once the bull market collapses, they are in a world of pain. Because as you probably know, bull markets never last. There was a mini-crash just in August, and if you have ignored proper diversification up until then, now could be a good time to adjust your portfolio. Even if a market has been on the rise for a while, it can fall within nanoseconds – and you cannot expect pity, or hope the market will wait for you to diversify your investments while it is already crashing.
You need to be prepared in advance, and this is exactly how diversifying your portfolio is one of the best ways to increase investment returns. It makes your investments much more resilient in the face of unexpected developments. A good way to start is to try and have a certain percentage of your portfolio in fixed-income investments and also in cash equivalents. Otherwise, no matter how many gains you make, you will lose them in a split second once you are out of luck.
3. Keep rebalancing.
Continuing on from the previous one of the ways to increase investment returns is to keep rebalancing your portfolio. Rebalancing makes sure that you consistently hit your target of diversification.
If you, say, originally made a plan that said you should have 60% of your portfolio in stock investments, 30% invested into bonds and 10% put in cash, then you should keep checking if this is what your portfolio actually looks like. Trading days can be chaotic, and after a couple of weeks or months, your portfolio may suddenly be a lot different from how you want it to be, which is definitely suboptimal.
This is equally true in a bear market because if your portfolio is properly balanced you will also be able to take advantage of the gains coming with the market recovery once it happens. Ways to increase investment returns are hardly get-rich-quick methods, but methods to improve the foundation of your investment strategy. And this is certainly one of the ways to accomplish that.
4. Invest efficiently.
Returning to the vein of ways to increase investment returns by cutting down on cost, saving taxes is another big way your investment portfolio can be subtly impacted. Of course, it is almost impossible to completely get rid of things like income tax – unless you have an IRA or a different type of tax-sheltered plan.
But you can minimize the income tax you have to pay by avoiding heavy trading, for example. Every capital gain results in taxes, as well as trading fees, which can add up quickly to make your portfolio perform basically the same as a buy-and-hold model, which is a lot safer and less stressful.
These 4 ways to increase investment returns should give you some pointers to maximize your assets. Remember to keep a cool head out there, and happy trading!